fbpx

4 Reasons why MPC do not reduce interest

For the loan and deposit interest rate currently, the MPC still sets them at 2.50% per year. The BOT views that lowering interest rates is not boosting the economy much and the interest relief does not make the spending in tourism or export demands better.

เนื้อหา

Due to the pressure from the government, Mr. Srettha Thavisin, the Prime Minister, suggested that the BOT should reduce the interest rate to boost the economy and reduce the burden for investors and the public after the economy figures in 2023 grew only by 1.9% which is lower than expected.

In the special interview with Nikkei Asia, Dr. Sethaput stated that the central bank was not “stubborn” on the current interest rate which is at a high level in decades, but considered the latest figures showing weak economic growth and negative headline inflation. The Gross Domestic Product grew only 1.9% which is lower than the markets’ expectations due to the political situation that has no progress which delayed the 2024 government budget.

Recently, the Bank of Thailand (BOT) revealed the meeting report of the Monetary Policy Committee (Short version) No. 1/2567. It stated the result of the committee consideration with most of The MPC decided to maintain the policy rate at 2.50% per annum in a 5-to-2 resolution. 4 votes view that maintaining a neutral policy rate will help support sustainable economic growth, which requires maintaining financial stability.

There are 4 reasons as follow

  1. The decelerating growth in the Thai economy was mainly due to lower external forces and the impact of structural factors.
  2. Lowering the interest rate will not boost the economy much in the context that domestic demand continues to expand and cannot solve structural problems that can cause the Thai economy to grow low. In addition,  the limited policy space will be used ineffectively.
  3. Structural problems may be significant in maintaining the policy interest rate at the Neutral Interest Rate, depending on economic growth potential. However, the impact is assessed to not have much and from the highly uncertain situation, it is deemed that further information should be studied more clearly.
  4. The cost of implementing an overly lenient monetary policy is to stimulate new debt creation in the current economic system, which may disrupt the progressive deleveraging process. In addition, it may increase the behavior of seeking more risky benefits, reduce production capacity development incentives, affect resource allocation efficiency, and increase fragility in the economic system.

Dr. Sethaput also said that the increased household debt is not a minority because interest rates have been very low for a long time, it will encourage borrowers to borrow money, and another rate lowering will give the wrong signal in trying to manage household debt more sustainably.

 However, the MPC is flexible and ready to lower its policy rate if economic development and inflation change significantly. Lastly, whether the MPC decides to hold an urgent special agenda meeting or lower the interest rate or not?

About The Author

Picture of ACU PAY Thailand

ACU PAY Thailand

ให้ทุกเรื่องการเงินเป็นเรื่องง่าย เริ่มต้นวันดีๆ ไปกับเรา MAKE A GREAT DAY WITH ACU PAY

相关文章