Sethaput Suthiwartnarueput Affirms Independent BOT Rate Decisions Against Political Pressure

Political pressure may not sway Thailand’s central bank in making independent interest rate decisions, according to Bank of Thailand Governor Sethaput Suthiwartnarueput. Speaking on CNBC’s “Street Signs Asia,” he cited the decision not to cut rates despite calls for it as evidence that the BOT operates independently from political pressure. He explained that while there have been demands, particularly from Prime Minister Prayut Chan-o-cha, for lower borrowing costs, rate cuts would only be made if they were deemed appropriate by the central bank’s Monetary Policy Committee (MPC). “The proof is in the pudding,” said Sethaput. In its last policy meeting, the BOT decided to keep rates at 2.5%, with some MPC members expressing concern about household debt levels and calling for deleveraging. While lower borrowing costs can stimulate economic growth by encouraging businesses to invest and consumers to spend more, high levels of outstanding debt could hinder long-term economic expansion if it doesn’t contribute towards future income or wealth accumulation, according to the MPC minutes. Sethaput acknowledged that managing weak recovery while implementing monetary policy has been a challenging balancing act for the central bank as factors causing sluggish growth are not necessarily sensitive to interest rate changes. “The current rate is supportive of [economic] recovery,” he explained. While inflationary pressures have recently remained subdued, Sethaput predicted that prices would gradually pick up and return within the BOT’s target range (1%-3%) by year end. However, structural headwinds make economic outlook uncertain due to demographic challenges with a shrinking labor force requiring higher productivity levels. He suggested greater emphasis on public investment rather than short-term stimulus measures as well as deregulation and ease of doing business considerations in Thailand’s economy.