TCC backs central bank’s decision to maintain interest rate at 2.25%

The Thai Chamber of Commerce (TCC) on Thursday said it backed the central bank’s decision to maintain the policy interest rate at 2.25%, saying it was suitable for a reviving economy. 

Sanan Angubolkul, who chairs both the TCC and the Board of Trade, said he supported the Monetary Policy Committee’s (MPC) decision to maintain the rate at 2.25%. The decision was made at the last meeting of the year on Wednesday. 

The MPC decided to maintain the rate despite calls from several businesses for it to lower it by 25 percentage points so it is in line with the recent 25 percentage point decrease by the US Federal Reserve and other central banks in the West. 

Sanan said on Thursday that Thailand’s policy rate was not as high as in the West, so the Bank of Thailand does not have to follow the policies of Western central banks. 

For instance, he said, the US policy rate has risen from 0.25% to 5.5%, while Thailand’s rate rose from 0.5% to 2.5% before it began dropping. 

Moreover, he said, he believes the current policy rate is at the right level to promote savings among Thais. 

He also said the policy rates for developed countries will naturally be higher than those in developing countries. However, he said, the Thai economy may face uncertainties by trade wars that may intensify next year. Hence, he said, this is the right time for the central bank to step in and take contingency steps if the economy deteriorates. 

Sanan went on to say that the TCC believes several economic measures will help the Thai economy pick up early next year, so it may not be necessary for it to lower the policy rate to spur growth just yet.

Such measures include the plan to make shopping tax-deductible, the handing out of 10,000 baht to 4 million seniors in January, the Government Housing Bank’s measure to waive interest for home loans for a set period as well as the government granting subsidies to rice farmers. 

Sanan said the tourism industry is also expected to improve further next year, so a lower interest rate is not necessary for now. 

He also said that the TCC believes the baht has depreciated to just the right level to support exports. If the policy rate drops further, then the baht could depreciate far too much and affect the outflow of foreign funds, he added.