PM meets Bank of Thailand governor after rate hike

2 Prime Minister Sretta Thavisina met with Central Bank Governor Setaput Suthiwartanarueput at Government House at 3:26 p.m. on October 2, 2023. The meeting discussed economic and financial issues. A productive exchange of views led to their agreement to meet monthly. The meeting lasted about 45 minutes after which Mr. Setaput left without speaking to reporters.

At the Finance Ministry, Mr. Thavisin, who is also the Finance Minister, said Mr. Setaput had voiced his concerns and recommendations and he had listened carefully. The prime minister said there was no conflict between the two.

The meeting came less than a week after a surprise interest rate hike that seemed at odds with the government's efforts to stimulate the economy.

Mr. Thavisin has confirmed plans to inject 560 billion baht into the economy next year through his signature digital wallet policy, a major part of his Phu Thai Party's election program. The real estate tycoon, who is also finance minister, has already unveiled a series of measures, including lowering electricity prices and abolishing visas for Chinese tourists, to spur short-term economic growth.

The central bank last week raised its key interest rate to 2.50 percent, the highest in 10 years, while cutting its 2023 growth forecast from 3.6 percent to 2.8 percent and raising its 2024 forecast from 3.8 percent to 4.4 percent, anticipating the risk of inflation due to new government policies.

Before the meeting, Mr. Tavisin said they would discuss "everything" with Mr. Setaput. The central bank governor on Friday said he did not know what would be on the agenda.

Mr. Setaput last month said there was no need to stimulate consumption. On Friday, after raising interest rates, he said a pause was appropriate at this time.

In a Reuters poll conducted from Sept. 27 to 29, all 20 economists expected the Bank of Thailand to keep rates on hold at its next meeting on Nov. 29.

"Raising rates could slow down the economy as it delays investment," said Siam Commercial Bank economist Punyawat Srising.

With inflation in the range of 1 percent to 3 percent, rates are expected to remain unchanged even if the economy grows at 5 percent, Punyawat added.

Some analysts believe that the different approaches of the government and the Central Bank are not contradictory.

"The central bank wants to ensure a stable recovery and the government wants to bring the economy back to normal... both want to see growth," said Krung Thai Bank economist Phacharaphoth Nuntramas, adding that the government's approach poses certain fiscal risks that need to be managed.

In a live broadcast on Monday, Mr. Thavisin reiterated that the government will further reduce electricity prices and triple farmers' incomes within four years, as well as continue to pursue new free trade agreements to make Thailand a major center for attracting foreign investors.