The Bank of Thailand answers the burning question, explains 4 reasons for “negative inflation” and why they haven’t cut interest rates yet.
On January 16, 2024, journalists reported that After being heavily criticized for the performance of the Monetary Policy Committee (MPC), the Bank of Thailand (BoT) raised the official interest rate 8 consecutive times to 2.5%, although in some periods the inflation rate will be negative. On January 15, BoT organized a forum to open up the concept of national banking policy. To answer burning questions
Mr. Piti Disayathat, Deputy Governor Monetary Policy Line Bank of Thailand (BoT) as Secretary The MPC explains the case of negative inflation and why the MPC does not reduce interest rates for 4 main reasons: 1. Negative inflation. arises from specific factors that are not sustainable
2. The reduction in interest rates does not reflect the weakening of purchasing power. Because monetary policy cannot respond to these factors. 3. Inflation expectations are still pegged at 2% in many respects, and 4. Falling inflation is a factor in manufacturing supply problems that have eased for some products.
“We will see inflation remain negative until February and then gradually increase to 1-2% by the end of this year. Therefore, there is no need for a special meeting of the MPC. The MPC will hold the first meeting will be held at the end of January and the results will be announced at the beginning of February.”
The secretary of the MPC explained the implementation of monetary policy It is a difficult thing. Because of the broad impact, there are those who gain and those who lose. But when we are asked whether we went in the “wrong direction” or “made a mistake” or not, the answer is “no”. However, when interest rates are raised, there are 2 parts:
1. It affects and increases people’s interest burden and 2. It increases the incentive to create new debt. But now, with household debt levels rising it makes less room to take on debt. But it must be done carefully.
Furthermore, the MPC has designed policies to accommodate many cases, such as the case of the distribution of 10,000 baht in digital wallets, which still has considerable uncertainties. But the interest rate has increased in the last 2 times to 2.25-2.50% per annum, even if digital wallets Will it arrive later or earlier than expected? or has changed But interest rates at that level can support either case, as long as the economy is still within usable ranges.
Mr. Piti also said that MPC listens to all sectors and has coordination with the Ministry of Finance Including the Prime Minister Then take it to see if it is consistent with what it should be or not. The role of monetary policy is like that of the goalie or quarterback on a football team. people and the business sector will constitute the vanguard that will enter the field
“The central bank’s job is to act as a gatekeeper. Ministry of Finance is the coach or captain. The government, on the other hand, is the team manager who can restructure many things more broadly. Where the role will clearly be seen as one of doing our best. Going above and beyond the call of duty We have to evaluate whether it will be worth it or not.”
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