BANGKOK, Oct 10 (Reuters) – Thai interest rates could be cut if needed to spark inflation and growth, but the central bank was able to hold policy steady this week as earlier cuts are still working through the economy, new Bank of Thailand Governor Vitai Ratanakorn said on Friday.
Vitai, who took office at the start of October, said he wanted to lift inflation into the BOT’s target range and focus on challenges such as high household debt, while also ensuring the central bank’s independence from political interference.
“The effects of previous rate cuts have not been fully felt, but the bank can decrease rates if necessary,” Vitai told reporters at a briefing when asked about the central bank’s unexpected decision to hold steady earlier this week.
After cutting rates four times in the past year, the Bank of Thailand held its benchmark rate at 1.50% on Wednesday, thwarting market expectations for a cut. The committee’s next review is on December 17.
CLOSE EYE ON INFLATION AND CURRENCY
At Wednesday’s review, the BOT cut its forecast for headline inflation this year to zero, from 0.5% previously. The inflation rate has been negative for the past six months, well below the target range of 1% to 3%, but Vitai said there was no deflation.
“Overall inflation may seem low, but it will gradually rise. In the long run, inflation will gradually return to the target band,” he said, adding the target for next year was being discussed with the finance ministry.
The new governor, a former head of Thailand’s largest state-owned lender, said the strength of the baht currency was driven by external factors.
The baht’s rise against the U.S. dollar, which saw it hit four-year highs last month, has added to the challenges facing Southeast Asia’s second-largest economy, which include U.S. tariffs, high household debt and weak consumption.
Vitai said the central bank would be closely monitoring the impact of gold trading and capital flows on the baht, and said he favoured dollar-based gold trading in the domestic market.
Thailand’s economy, which has lagged regional peers in recent years, is expected to grow 2.2% this year and 1.6% in 2026. Growth last year was 2.5%.
Source:Retuers