Minister presses BoT on policy rate move

In light of the Federal Reserve’s recent interest rate cut, the Bank of Thailand’s Monetary Policy Committee (MPC) must decide whether to adjust its policy rate accordingly, says Finance Minister Pichai Chunhavajira.
Mr Pichai said on Friday the Fed’s decision to cut interest rates again indicates the US stance on inflation remains unchanged as it trends downward.
On Thursday, the Fed cut its benchmark lending rate by 25 basis points to between 4.50-4.75% from 4.75%-5%, as US inflation is moving towards the Fed’s target of 2%.
In mid-September, the Fed reduced its policy rate by 50 basis points to a range of 4.75%-5%, marking the first rate cut since 2020, when the Fed brought rates near zero to stimulate the economy amid the Covid-19 pandemic.
“The MPC’s decision depends on how it interprets the Fed’s move and whether we should follow the US direction. It is the responsibility of the MPC to make that determination,” he said.
In making this decision, Mr Pichai said it is essential to evaluate the effective interest rates of different countries to determine which is higher.
Capital can flow anywhere right now, especially with US political policies still unclear, he said.
When funds move, it affects currency values, and exporters prefer not to see the baht strengthen, said Mr Pichai.
He previously mentioned Thailand is an export-led country, so currency management should aim to keep the baht weak.
Although a portion of Thailand’s production for exports involves importing goods for domestic production, the net export value is positive.
Managing the currency is not a matter of simple devaluation, but requires a systematic approach that can vary by country and context, said Mr Pichai.
The Bank of Thailand unexpectedly cut its key interest rate for the first time in four years last month by 25 basis points to 2.25%.
From the Srettha Thavisin government to the current administration under Paetongtarn Shinawatra, both led by the Pheu Thai Party, there have been repeated calls for the central bank to reduce the policy rate, seeking to support individual borrowers and small businesses.