Economist claims political, business pressure led to sudden rate cut
Monetary Policy Committee’s decision follows calls from Pheu Thai-led government and business leaders seeking relief from financial burden
Somchai Pakapaswiwat, an economist and independent academic, claims the Monetary Policy Committee (MPC) was pressured by politicians and business leaders to cut the policy interest rate by 25 percentage points.
The MPC voted on Wednesday to cut the policy rate from 2.5% to 2.25%. This reduction comes a day after Thai business leaders across different sectors expressed hope that the Bank of Thailand (BOT)’s MPC would reduce the policy rate during its meeting on Wednesday to ease the financial burden on businesses.
The Pheu Thai-led government has also repeatedly called on the committee to cut the rate.
The MPC has held the rate steady at 2.5% for over a year, explaining that it is suitable for Thailand’s economy, which is still recovering after the fallout of the pandemic.
Somchai said it is about time for the MPC to cut the rate because the government’s distribution of 10,000 baht to 14.5 million recipients at the end of last month did not affect the inflation.
He said the US policy rate was always on a downward trend, and though the Thai economy is expanding, its expansion is not strong enough.
Somchai said that if the MPC had decided not to lower the rate, the rate in Thailand would be too high compared to other countries.
He added that a lower rate would reduce the loan interest burden on the business sector, but admitted it was too early to predict how a lower rate would contribute to economic growth.
