MPC maintaining policy rate at 2.5% ‘a surprising move’: FTI
Monetary Policy Committee says it made the decision as it feels the Thai economy is on the road to recovery
The Federation of Thai Industries (FTI) has expressed surprise at the Bank of Thailand’s Monetary Policy Committee’s decision on Wednesday to maintain the policy interest rate at 2.5% per annum.
MPC secretary-general Piti Disyatat said the committee voted 6 to 1 to retain the current policy “as it sees the Thai economy on track to recovery”.
FTI chairman Kriangkrai Thiennukul disagreed, pointing out that the global economy is still in a downward trend and central banks of several countries have started lowering their policy rate.
“The Thai economy is still sluggish due to high household debts. It needs stimulation by increasing purchasing power and reducing costs of entrepreneurs, ideally by reducing the interest rate on loans,” he said.
Kriangkrai added that the Thai private sector has been hoping to see a lower policy rate in the second half of 2024, especially SMEs that need immediate financial support to keep their business afloat and capable of combatting the influx of ultra cheap imports.
Sanan Angubolkul, chairman of the Thai Chamber of Commerce, said that the MPC could have come to this conclusion after considering various aspects of the Thai economy, which has shown signs of recovery in several sectors, albeit at a slow rate or on a very small scale.
“We believe the MPC also intended to maintain the difference in policy rates of Thailand and the US. If the difference grows any bigger it could trigger the outflow of funds,” he said, adding many countries are also keeping their policy rate unchanged as they wait for the Federal Reserve to make a move sometime this year.
He also believed that Thailand’s low inflation rate of under 1% is due to the government’s energy-related subsidies and not the result of interest rate policy.
“The private sector hopes that if global interest rates show a clear downward trend, the MPC will consider adjusting interest rates downward appropriately to support the continued recovery of the Thai economy,” Sanan said.
