The Governor of the Bank of Thailand confirmed that he will not block a reduction in the policy interest rate.

The Governor of the Bank of Thailand confirmed that he would not block a reduction in the policy interest rate if financial stability is too tight. He is ready to continue working with the government. He declined to answer questions about reducing the money entering the FIDF. Mr. Sethaput Suthiwatanaruput, Governor of the Bank of Thailand, mentioned about the latest Monetary Policy Committee (MPC) meeting on August 21, 2024, to maintain the policy interest rate at 2.50% per annum that the MPC's consideration came from 3 factors: economic growth, inflation, and financial stability. Economic growth is starting to reach its potential, but there are signs of downside risks. The economic growth figures for the second quarter of 2024 are lower than expected private sector investment, while the inflation rate is starting to return to the lower range of 1-3% and there are still no signs of deflation. However, what is concerning is financial stability, especially in the case that financial institutions are more stri ngent in granting loans than the actual risks, but it has not yet reached the point of tightness in the financial system. The BOT will monitor developments in the future, but is ready to adjust monetary policy to be appropriate for the changing situation if it is tighter than it should be. 'I would like to reiterate that in every MPC meeting to consider the policy interest rate, the economic situation, inflation, and financial stability will be considered. If the trend is close to our assessment, we believe that there may be a need to reduce the interest rate. However, if the trend changes, we do not block the policy adjustment. In the latest MPC statement, we can see that the committee expressed more concern about financial stability,' said the BOT governor. The BOT Governor added that the BOT is ready to work with the government and the Ministry of Finance. There are many groups that have been working together all along, but they have not been publicized. However, people are interested in different opinio ns, such as the policy of reducing interest rates, which comes from wearing different hats. The BOT must take care of stability, while the Ministry of Finance takes care of economic growth. However, this does not mean that they cannot work together. As for the case of the US Federal Reserve or the Fed signaling a reduction in the US policy interest rate, it is considered that the Fed has been signaling a continuous reduction in interest rates, not beyond what was expected. As for whether this will pressure Thailand to reduce interest rates as well, the Governor of the Bank of Thailand emphasized that Thailand's monetary policy depends primarily on the Thai economic situation, but it must also take into account the impact factors, such as the monetary policies of major countries that affect capital flows and exchange rates. In the case of former Prime Minister Thaksin Shinawatra proposing a plan to consider reducing the amount paid to the Financial Institutions Development Fund (FIDF) and the Deposit Protect ion Agency, which is 0.46-0.47%, by half to 0.23%, the BOT governor said it was too early to give an answer. While Ms. Suwannee Jesadasak, Assistant Governor, Financial Institutions Supervision Group, BOT, said that currently, financial institutions are sending money to the FIDF Fund at 0.46% to pay interest of approximately 16 billion baht per year from the principal amount of government bonds issued at 580 billion baht, and it will be reduced to 550 billion baht this September from the latest round of financial institution money transfers to the fund. If the money transfer is reduced by half, it will increase interest payments by 5 billion baht per year and make the outstanding debt payable slower. Source: Thai News Agency