Finance minister prioritises funding access over rate cuts

Finance Minister Pichai Chunhavajira affirmed the significance of access to funding sources over lowering interest rates. Following discussions with Bank of Thailand Governor Sethaput Suthiwartnarueput, Pichai underscored that interest rate policy remains under the purview of the central bank’s Monetary Policy Committee (MPC), which is set to convene on October 16.

Describing the talks as comprehensive, Pichai highlighted various factors such as US and European interest rate cuts and Chinese economic stimulus measures that will influence capital inflows into Thailand. He acknowledged that while reducing domestic interest rates could ease the burden on new borrowers, loan approvals would still hinge on individual creditworthiness and repayment capacity.

Moreover, Pichai pointed out that a decrease in interest rates would result in a slight decline in bond yields.

The Bank of Thailand has maintained its key rate at a decade-high of 2.50% for five consecutive meetings since August, resisting government pressure for a rate cut. Sethaput argued that lower rates would have minimal impact on an economy needing significant structural reforms.

Addressing the potential effects of interest rate reductions on the Thai baht and the export sector, Pichai expressed doubt that a rate cut would significantly influence export volumes. Nevertheless, he remained hopeful for an increase in export growth in the last quarter of the year.

Pichai emphasised that interest rates are just one of many tools available to the central bank and that other measures should also be considered.

Reiterating his stance, Pichai stressed that ensuring liquidity and access to funding sources is more crucial than reducing interest rates, reported Bangkok Post.

“Currently, the country does not have liquidity issues. We have sufficient liquidity, but lenders are concerned about extending their credit.”

“In this regard, the Ministry of Finance and the Bank of Thailand will schedule another detailed discussion by the middle of this month.”