Thailand urged to cut interest rates amid low inflation concerns
Finance Minister Pichai Chunhavachira has reiterated his call for a reduction in Thailand’s policy interest rate to boost inflation. He urged the Monetary Policy Committee (MPC) to announce another rate cut, citing the current low inflation rate as a driving factor.
The Finance Ministry continues to provide economic data and engage in discussions with the Bank of Thailand, although the decision remains within the MPC’s jurisdiction.
The Finance Ministry plans to present its inflation management target framework for 2025 to the Cabinet this month. Once approved, the central bank will manage inflation within the defined range.
Additionally, the nomination process for the new chairman of the Bank of Thailand’s board is underway. Pichai is reviewing candidates based on a selection committee’s recommendations, with a decision expected by mid-January 2025.
In other developments, Pichai mentioned the rollout of the second phase of the 10,000-baht cash handout programme for individuals aged 60 and above. Scheduled for implementation during the Chinese New Year, Cabinet approval is pending.
Research from local institutions suggests the central bank is likely to keep its policy rate unchanged at 2.25% in the upcoming meeting. This decision aims to maintain monetary policy space amid rising uncertainties. A potential rate cut could occur in February 2025, according to these forecasts.
The Kasikorn Research Centre (K-Research) anticipates the MPC will unanimously decide to maintain the interest rate at 2.25%. This aligns with the MPC’s strategy of keeping the benchmark rate neutral in response to economic risks, inflation, and financial stability.
Interest rates
“Given that the current risk landscape has not changed significantly, and with the Thai economy expected to accelerate in the fourth quarter, boosted by seasonal tourism and government stimulus measures, the MPC is likely to keep the policy rate unchanged at tomorrow’s meeting,” said K-Research.
In its previous session, the MPC reduced the policy rate by 25 basis points for the first time in four years, aiming for a neutral interest rate level. K-Research predicts two more rate cuts next year due to increasing economic risks, including potential US import tariffs on Thailand and competition from Chinese products.
Inflation in 2025 is expected to remain below the central bank’s target range of 1 to 3%. The future monetary policy trajectory remains uncertain and will depend on economic data, inflation trends, and financial stability indicators.
Krungsri Global Markets and Research, affiliated with the Bank of Ayudhya, forecasts the MPC will keep the rate at 2.25% in the upcoming meeting, a Krungsri spokesperson said.
“This decision will allow the MPC to assess the effects of October’s rate cut and the government’s stimulus measures while preserving the policy space for future adjustments. However, we expect the MPC to lower the rate to 2% in February 2025.”
Siam Commercial Bank’s research centre, SCB EIC, also anticipates the policy rate will remain unchanged in December. This aligns with the MPC’s strategy of preserving policy space to address future uncertainties in Thailand’s economy and financial system, reported Bangkok Post.
However, the SCB EIC expects a 0.25 percentage point rate cut in February 2025 to support liquidity and address increasing risks, particularly from a potential Trump 2.0 policy direction.
