Central bank chief sees ‘high’ bar to another rate cut

Bank of Thailand (BoT) governor Sethaput Suthiwartnarueput signalled policymakers will not be rushing to follow up on last week’s interest-rate cut and defended the current inflation target amid government calls to ease policy further and lift the price goal.
“Given that we just recalibrated, I think the bar for taking further rate moves has to be reasonably high,” the central bank chief said in an interview with Bloomberg Television’s Haslinda Amin on Tuesday in Washington. Slowing credit growth was one of the factors that convinced the BoT to cut the key rate for the first time in more than four years, Mr Sethaput said.
Future actions will be guided by the outlook for inflation, economic growth and financial stability, he added.
The governor’s remarks suggest the monetary authority will take its time in reducing borrowing costs. That puts it on a collision course with Prime Minister Paetongtarn Shinawatra’s government, which continues to push for lower rates and a higher inflation target to energise a sluggish economy.
“The pressure has been there, it is there, and it will continue to be there,” Mr Sethaput said of government attempts to influence the BoT. “So that wasn’t the real, the main reason for our taking the rate decision,” he said.
The governor said the central bank had been “surprised to the extent that the market was surprised” by the rate cut.
Earlier on Tuesday, he reiterated that the move was a “recalibration” and that he does not see it as “the beginning of an extended easing cycle.”
Mr Sethaput, who is meeting with the finance minister later this month to agree on next year’s inflation target, said the current framework of a 1%-3% band has served the economy well. It has kept price expectations anchored and enabled the central bank to deliver a moderate tightening cycle at a time when neighbours jacked their rates up much higher, he said.
“If you move the band and move it upwards, it would cause expectations to move up” and consequently shift the cost of living higher and bond yields along with it, the governor said. He is in Washington to attend the annual International Monetary Fund (IMF) and World Bank meetings.
Mr Sethaput said he reckons the Federal Reserve of the United States can engineer a soft landing for the US economy, highlighting that the bigger concern is the “uncertainty on what’s going to happen on the policy front” after the US presidential election.
Meanwhile, China’s slowing economy continues to impact the region, including key Thai exports and tourism, he said. Thailand’s economy has trailed the expansion of its neighbours, hobbled by massive household debt and a manufacturing sector struggling to cope with cheap imports from China.
But Mr Sethaput insisted that tariffs are not the solution to the current difficulties.
A “tariff decision is big and one that’s fraught with a lot of implications. Already, there’s sufficient turmoil on the trade front,” he said. “So those kinds of decisions need to be taken very carefully.”