Thai Central Bank Chief Pushes Autonomy Amid Rate Cut Calls
(Bloomberg) -- Bank of Thailand Governor Sethaput Suthiwartnarueput said it’s crucial for central banks to have independence in setting monetary policy, capping a week that saw the government resume calls for rate cuts and currency intervention.
Most Read from Bloomberg
Belfast’s Grand Central Station Creates New Era for Northern Ireland’s Public Transport
California’s Anti-Speeding Bill Can Be a Traffic Safety Breakthrough
New York City’s Transit System Plans $65.4 Billion of Upgrades for Grand Central, Subways
“The central bank’s duty to look at the long-term outlook must come with operational independence,” Sethaput said in a speech on Friday in Bangkok.
“In many cases, central banks need to conduct monetary policy against an economic cycle which will have a wide impact,” he said. “There will be gainers and losers. If the central bank is not independent enough, it may lose track and lose its long term vision.”
Sethaput, who ends his five-year term as Bank of Thailand governor a year from now, has been at the center of tensions with a government campaigning to revive the economy with lower borrowing costs and expansive stimulus. While his remarks referred to central banking in broad terms, they come days after members of Prime Minister Paetongtarn Shinawatra’s cabinet renewed calls for the BOT to cut rates and temper the baht’s surge.
Read: Baht’s Biggest Rally Since 1998 Threatens Thai Tourism, Exports
The Monetary Policy Committee has kept the key rate steady at 2.5% since the fourth quarter of 2023 even as inflation stayed below the BOT’s 1%-3% target. Sethaput said Thai monetary policy would be guided by the outlook for domestic economic and financial conditions and inflation, and won’t be swayed much by the US Federal Reserve’s interest rate moves.
“Fed cut or no cut, there has been pressure on MPC,” Sethaput said. “When Fed cuts rate, it doesn’t mean we need to cut. But we need to consider about its impact on many important factors.”
Thailand’s financial markets have been orderly after the Fed’s rate cut Wednesday, the governor said, adding a debt restructuring may be better for local borrowers than a rate cut which may not benefit debtors across the board as some loans are on fixed interest rates. Still, the central bank is on alert for any signs of higher credit risks and tightening financial conditions, he said.
While analysts have said the strength in the Thai currency may prompt the BOT to consider bringing the benchmark interest rate lower from a decade high, Sethaput said the gains were in response to a weak dollar and spike in gold prices. The central bank is closely monitoring the currency as it doesn’t favor excess volatility, he said.
The baht has gained more than 10% this quarter against the dollar, poised for its biggest rally since the Asian financial crisis late last century. It was little changed near a 19-month high at 3:35 p.m. local time.
(Updates with governor’s comments from fifth paragraph.)
Most Read from Bloomberg Businessweek
Xbox’s President on Handheld Consoles and Subscription Gaming
The Fed Risks a Political Backlash by Spurring Economy Close to Election
©2024 Bloomberg L.P.
