He added that despite “calls” for a rate cut, the BOT would not have responded “if it were not operating independently.”
“I think the governance framework for that is very clear…the decisions that have been made show that they have been made on the basis of [what] We believe it is in the best interest of the economy, rather than considering easing political or other pressures. ”
The BOT kept its key interest rate unchanged at 2.50% at its latest policy meeting in April. However, central banks are under intense pressure from governments to cut interest rates. IAccording to Reuters, among them was the country’s Prime Minister Suretta Tabisin.
Lower borrowing costs encourage business investment and consumer spending, which tends to stimulate economic growth.
The Monetary Policy Committee stated in the minutes of its April meeting that it “expressed concern about the increase in household debt and recognized the importance of debt deleveraging.”
“High levels of debt can hinder long-term economic growth, especially if the debt does not contribute to future income or wealth accumulation,” the report said.
Setaput acknowledged this was a “difficult balancing act” for the central bank as it tries to manage a weak economic recovery and monetary policy.
“If you look at the causes of the slowdown in growth, it doesn’t have much to do with interest rate sensitivity,” he said.
The BOT chief said that current interest rates “support economic recovery” and “strike a balance between not incentivizing orderly deleveraging, i.e., not increasing household debt burdens too much, but at the same time not incentivizing them.” He said it was in line with what he was aiming for. People may take on large amounts of new debt. ”
According to the latest BOT minutes, Thailand’s economy is expected to grow by 2.6% in 2024 and 3.0% in 2025., With continued support from personal consumption and tourism,
Setaput said that although inflationary pressures had been subdued in recent months, “inflation has returned and will gradually rise and return to the target range (1-3%) by the end of the year.”
Structural headwinds make the economic outlook uncertain, the governor added, and productivity needs to increase as the country faces demographic challenges of a “shrinking workforce.”
He said there needed to be “more emphasis on public investment and less on short-term economic stimulus”.
Mr Setaput said he believed that “a very important thing is to put more emphasis on deregulation, including ease of consideration of business forms”.
