BANGKOK (Reuters) — Thailand’s Finance Minister, Pichai Chunhavajira, indicated that the country’s low inflation levels provide an opportunity for an interest rate reduction, which could stimulate economic growth and help weaken the baht.
Ahead of the Bank of Thailand’s upcoming rate review, 16 out of 26 economists surveyed by Reuters expect the central bank to maintain its key interest rate at 2.25%. However, Pichai highlighted that a rate cut could invigorate economic activity, suggesting that reducing interest rates would help sustain the economy’s momentum.
“Our inflation has been consistently low, which provides space to reduce interest rates,” Pichai said during a briefing. He further noted that prolonged low inflation could adversely affect producers due to the resulting low prices for goods.
January’s headline inflation stood at 1.32%, significantly below the central bank’s target range of 1% to 3%. This follows a year where inflation averaged just 0.4%.
In addition to the potential rate cut, Pichai emphasized the government’s ongoing efforts to tackle the country’s persistent household debt issues. He called on banks to increase lending and urged the central bank to relax loan-to-value regulations to support the property sector.
Pichai also touched upon the importance of a weaker baht for Thailand, a nation reliant on exports. He remarked, “Every exporting country wants its currency to weaken.” Since the start of the year, the baht has strengthened by 2.5% against the US dollar.
The Finance Minister confirmed that the issues surrounding inflation, household debt, lending, the baht, and interest rates have been under discussion with the central bank.
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