Srettha reiterates benefits of a rate cut after BOT refuses to budge
Prime Minister Srettha Thavisin once again made the case for reducing the key policy interest rate, saying it will benefit consumption, exports and tourism.
He was speaking on Thursday after the Monetary Policy Committee (MPC) of the Bank of Thailand (BOT) voted 5:2 to maintain the policy interest rate at 2.5% on Wednesday.
The PM said interest rate was among the factors affecting people's decision to purchase houses.
"Purchasing one house covers expenses for home decorations and electrical appliances, which would result in money circulating in many industries," he said.
He asked the BOT to pay attention to people's suffering, adding that people would decide if the central bank should reduce the interest or not.
Srettha, who is also finance minister, believes that reducing the interest rate will benefit the economy. He said Thailand's exports, which accounted for 60% of gross domestic product (GDP), would benefit from the weakening baht once the interest rate drops.
The weakening baht will benefit tourism, which accounts for 20% of GDP, as foreign tourists could purchase more products in Thailand, he said.
"Tourists do not spend time in large hotels. They also purchase foods and consumer products, so all people could benefit from them," he said.
The BOT statement said the Thai economy was projected to grow at a higher rate this year compared to last year, with continued support from private consumption and tourism. Public expenditure is also anticipated to accelerate for the remainder of the year.
“Structural headwinds continue to weigh on export recovery,” the BOT said. “Inflation remains subdued from supply factors and government subsidies and is projected to gradually shift towards the target range by the end of 2024.”
The BOT said most MPC members believed the current policy rate was conducive to safeguarding macro-financial stability and that the effectiveness of monetary policy in resolving structural impediments was limited.
“As a result, most members voted to maintain the policy rate at this meeting but will monitor uncertainties of economic factors going forward. Two members voted to cut the policy rate by 0.25 percentage point due to structural challenges and to partly alleviate the debt-servicing burden of borrowers,” the statement read.
