Thailand’s Central Bank to Discuss Inflation Target for 2025

By Kitiphong Thaichareon
BANGKOK (Reuters) – Thailand’s central bank chief and finance minister will meet in early September to negotiate an inflation target for 2025, seeking to establish a new goal in hopes of achieving a rate cut.

The government, aiming to revive its economy, has been in discussions with the Bank of Thailand (BOT) regarding interest rate cuts. Recent comments from Prime Minister Paetongtarn Shinawatra highlighted concerns regarding the central bank’s independence impeding economic resolutions.

Former Prime Minister Srettha Thavisin suggested a review of the 1-3% inflation target range could facilitate a potential rate cut. The BOT plans to propose a target during this upcoming meeting, with the aim of mutual agreement.

Despite the government’s push for a rate reduction, the BOT has maintained a decade-high benchmark interest rate of 2.50%. The finance ministry is preparing data for the meeting, though specifics will remain undisclosed until the conclusion of cabinet confirmations.

Thailand’s annual inflation target review requires agreement between the BOT and the finance ministry, as well as cabinet approval. Although BOT asserts the current target is effective, recent data indicates headline inflation averaged 0.11% from January to July 2023.

Governor Sethaput Suthiwartnarueput cautioned that altering the target might jeopardize monetary credibility and inflation expectations. The BOT is preparing an open letter explaining the low inflation rates, primarily attributed to government subsidies on energy prices.

Amid uncertainties in fiscal policy, Thailand’s economy has shown signs of growth, with a 2.3% increase in the April-June quarter compared to the previous year. The BOT forecasts a growth rate of 2.6% for 2024 after last year’s 1.9%.