BOT chief hints at status quo on key policy rate in current scenario
Sethaput says slowing credit growth was key factor behind 25 basis points cut at last MPC meeting
Bank of Thailand (BOT) Governor Sethaput Suthiwartnarueput on Tuesday sent clear signals that the central bank will not be rushing to follow up on last week’s interest-rate cut.
“Given that we just recalibrated, I think the bar for taking further rate moves has to be reasonably high," Sethaput said in an interview with Bloomberg Television's Haslinda Amin on Tuesday in Washington, while defending the current inflation target amid government calls to further cut the rate and raise the inflation target.
“Slowing credit growth was one of the factors that convinced the BOT to cut the key rate for the first time in more than four years,” he said.
The BOT chief added that the bank’s future actions would be guided by the outlook on inflation, economic growth and financial stability.
He said the current inflation framework still supports the economy well, helping to keep inflation forecasts stable and allowing the BOT to moderately raise interest rates, while neighbouring countries have to increase rates at a higher level.
“If you raise your inflation target, it will lead to higher forecasts, resulting in increased living costs, as well as higher bond yields,” he said.
The governor insisted that the latest policy rate cut was a "recalibration" and that he did not see it as "the beginning of an extended easing cycle".
Sethaput is in Washington this week to attend the annual International Monetary Fund (IMF) and World Bank meetings.
Last Tuesday, the BOT’s Monetary Policy Committee (MPC) voted 5 to 2 to cut the policy rate by 0.25 percentage point from 2.50% to 2.25%, effective immediately. It was the first rate cut in four years.
The MPC agreed that a neutral stance of policy rate remains appropriate with the economic growth and inflation outlook. Most members thus voted to cut the policy rate by 25 basis points to alleviate debt-servicing burden for borrowers.
The committee believes the lower policy rate will not impede debt deleveraging given the expected slowdown in loan growth and will remain neutral and consistent with Thailand’s economic potential.
