BANGKOK: The Bank of Thailand is unlikely to cut interest rates below the current 1% without a major economic shock and expects borrowing costs eventually to move higher as policy normalizes, according to Deputy Governor Piti Disyatat.
The current stance is accommodative and stands apart from tighter monetary settings in many other economies, Piti said in a Bloomberg Television interview Wednesday at the IMF-World Bank annual meetings in Bangkok. Thailand’s below-potential growth and relatively contained inflation justify that divergence, he said.
“Unless a big, big shock hits us, we will not go any lower,” Piti said. The 1% benchmark is historically low for Thailand outside periods of crisis and also low compared with other economies, he said, though the central bank retains room to ease if conditions deteriorate sharply.
Over time, however, rates will need to normalize alongside the economic recovery, with the pace depending on inflation and the baht, Piti said. “It’s definitely higher than now,” he said of a normal policy rate, putting the range at about 1.5%-2%. “Normalization, we can take it at our own pace.”
The comments provide some of the clearest guidance yet on the longer-term direction of Thai monetary policy ahead of the central bank’s next rate decision on Oct. 28. Governor Vitai Ratanakorn said Tuesday there was no urgent need to lower borrowing costs while stressing that future decisions remain data dependent.
The central bank has kept its benchmark rate at 1% for three consecutive meetings. Most economists surveyed by Bloomberg still expect it to remain there through the end of 2027, though forecasters at Standard Chartered Plc and Bank of America Corp. have highlighted growing risks to that view.
Thailand faces competing pressures. Inflation accelerated for a second month to 2.82% in September, while sluggish growth and heavy household debt continue to weigh on the economy. The country is also highly exposed to energy shocks, importing about 80% of its crude oil, roughly half of it from the Middle East, according to Piti.
Still, price pressures have been milder than the BOT expected. Piti said full-year inflation will probably be around 2%, below the central bank’s previous 2.8% forecast, while economic growth should be around its earlier 2.3% projection or slightly higher. Updated forecasts will be released with this month’s rate decision.
Recent flooding is also unlikely to materially alter the national outlook, Piti said. While some areas and industries including autos were hit hard, the disruption was localized and is receding.
The central bank also remains comfortable with the baht despite its depreciation this year. Piti said the currency’s resilience through large global shocks reflects confidence in Thailand’s policy framework and economic fundamentals.
Despite slower growth and Thailand’s exposure to the oil shock, “we don’t have the same degree of problems as other countries have had,” Piti said.