🔺 What to do when markets are at an all-time high? Find smart bargains, like these.See Undervalued Stocks

Thai government, central bank to keep inflation target for 2025

Published 10/29/2024, 02:27 AM
Updated 10/29/2024, 08:19 AM
© Reuters. Vendors sell pork at their stalls inside a market as Thailand is to inject $15.2 bln into economy next year through its digital wallet policy, in Bangkok, Thailand, October 2, 2023. REUTERS/Athit Perawongmetha/ File Photo

By Kitiphong Thaichareon and Orathai Sriring

BANGKOK (Reuters) -Thailand's government has agreed with the central bank to maintain the current 1% to 3% inflation target for 2025, in return for assurances the bank will support its fiscal policy and help jumpstart growth, the finance minister said on Tuesday.

The central bank has insisted the present target, in place since 2020, has worked well for the economy, but the government wants higher prices to boost economic activity amid tepid growth that has lagged regional peers.

The meeting between Finance Minister Pichai Chunhavajira and Bank of Thailand (BOT) chief Sethaput Suthiwartnarueput, first reported by Reuters, came after months of intense government pressure to cut interest rates and align with fiscal policy aimed at stimulating the economy.

Pichai said the BOT should support the government's efforts on the economy and consider inflation and foreign exchange when conducting monetary policy.

"I can accept the inflation target of 1%-3%, but there must be measures to support growth and bring actual inflation up to an appropriate point, close to 2% or at 2%," he told reporters after the meeting at the finance ministry.

The BOT declined to comment on the meeting.

Pichai said the real problem was not the inflation target, but debt, low investment and too low inflation, he said, adding the BOT must submit policy guidelines to him again.

The government had been pushing all year for a rate cut, blaming rates for suppressing activity and curbing its efforts to boost growth.

The BOT had long resisted the pressure, including from several major business groups, but unexpectedly cut its key rate by 25 basis points to 2.25% on Oct. 16, the first reduction since 2020. The next policy review is on Dec. 18.

Pichai said the BOT should also ensure that the baht currency supports exports, adding low interest rates would help the economy, investment and debt.

PUSH FOR INFLUENCE

The government will in two weeks introduce more measures to address household debt, he said, which was 16.3 trillion baht ($483 billion), or 89.6% of GDP, among the highest in Asia.

The government has sought to assert its influence on the BOT by nominating a ruling party loyalist and critic of the BOT governor for the post of board chair.

Ahead of Tuesday's meeting, Pichai had said inflation would miss the target this year, as average annual headline inflation was just 0.20% in the first nine months of 2024.

The central bank has long maintained that it is structural issues that are weighing most on growth.

BOT Deputy Governor Piti Disyatat told Reuters last week that inflation was low and well anchored, with no risk of deflation, while the economy was converging to trend growth.

The current policy stance was well-balanced and the recent rate cut was a "recalibration", not the start of an easing cycle, he said.

The BOT expects headline inflation, at 0.61% in September, to return to target late this year and predicts average inflation at 0.5% this year and 1.2% in 2025.

© Reuters. Vendors sell pork at their stalls inside a market as Thailand is to inject $15.2 bln into economy next year through its digital wallet policy, in Bangkok, Thailand, October 2, 2023. REUTERS/Athit Perawongmetha/ File Photo

The BOT this month raised its 2024 GDP growth forecast to 2.7 from 2.6% but trimmed its 2025 growth outlook to 2.9% from 3.0%. The economy expanded just 1.9% last year.

($1 = 33.76 baht)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.