By Orathai Sriring and Chayut Setboonsarng
BANGKOK (Reuters) -Thai Prime Minister Srettha Thavisin said he had raised concerns over high interest rates and economic conditions in a meeting with the central bank governor on Wednesday, saying “people are suffering”.
Srettha has been outspoken over his differences with the Bank of Thailand (BOT) over the policy rate, which is at a decade high of 2.50%, as he seeks to breathe life into a sluggish economy.
The central bank is independent and the prime minister has no authority to interfere.
But Srettha told reporters after the meeting with BOT chief Sethaput Suthiwartnarueput: “I explained how people and businesses are suffering from high rates…and the governor explained how the central bank was solving the debt problem,”
He said they did not discuss the controversial digital wallet handout programme. Srettha had been expected to press for a rate cut and defended the scheme, which involves a 500 billion baht ($14.3 billion) plan to transfer 10,000 baht ($286) to 50 million people to spend within six months.
Kasem Prunratanamala, head of Thailand research at CGS-CIMB in Bangkok, said: “I think the government may want to show that they have tried their best to bring down interest rates, but I don’t think that the central bank will cut rates anytime soon.”
The BOT has raised rates by 200 basis points (bps) since August 2022 to curb inflation, but held the rate steady at its November meeting. Its next policy review is on Feb. 7.
Respondents to a bond market survey released on Wednesday expected the BOT to cut rates by up to 50 bps in the second half of this year, while another business group expected a cut in the second quarter.
Srettha, who is also finance minister, said earlier this week that interest rate hikes were hurting the economy, while his deputy said the increases were “a bit too fast, too aggressive”.
Just before Srettha’s meeting with Sethaput, the BOT announced a Jan. 15 policy briefing to disclose its views.
The meeting marks the second time Srettha has publicly discussed raising his objections directly with the BOT over its monetary policy stance, the last time after a surprise rate hike in September.
Similarly, Sethaput has voiced concern about the potential impact of the government’s handout scheme on inflation and has said the economy needed structural change, not fiscal stimulus.
Real estate mogul Srettha this week said the central bank might need to consider reducing rates as inflation was very low.
Thailand’s headline inflation came in at -0.83% in December, the eighth straight month it was below the BOT’s 1% to 3% target range.
The central bank will clarify the negative inflation situation, Srettha said, adding he had asked the governor to closely monitor bonds that were below investment grade.
Last month, the BOT said headline inflation would have been positive had it not been for government subsidies.
($1 = 34.98 baht)
(Reporting by Kitiphong Thaichareon, Orathai Sriring and Chayut Setboonsarng in Bangkok; Additional reporting by Ankur Banerjee in Singapore; Edititing by Kim Coghill and Angus MacSwan)