By Kitiphong Thaichareon
BANGKOK (Reuters) – Thailand’s central financial institution chief and finance minister will meet in early September to open negotiations on an inflation goal for 2025, a senior official mentioned, as the federal government seeks a brand new aim with a watch on a fee minimize that it has pushed for months.
The federal government has been locked in a tussle with the Financial institution of Thailand (BOT) since final yr, repeatedly asking the central financial institution to chop key rates of interest to assist revive a flagging financial system, Southeast Asia’s second-largest.
Paetongtarn Shinawatra, who was elected prime minister earlier this month, in Could even described the central financial institution’s independence as an “obstacle” to resolving financial issues.
A assessment of the 1-3% inflation goal vary, which has been in place since 2020, might elevate the possibility of a fee minimize, her predecessor Srettha Thavisin, who was dismissed from workplace by a court docket order, mentioned in June.
On the upcoming assembly, the central financial institution would suggest a goal authorized by its financial coverage committee (MPC), BOT assistant governor Piti Disyatat mentioned.
“We have to wait for the meeting to see whether they are differences of opinion,” Piti advised Reuters, declining to reveal the MPC’s goal.
“We expect a mutual agreement to be reached.”
A scheduled first assembly for discussions between the BOT and finance ministry on the inflation goal has not been beforehand reported.
Regardless of authorities requires an easing, the central financial institution has stored its benchmark rate of interest unchanged at a greater than decade-high of two.50%. The following fee assessment is due on Oct. 16.
The finance ministry mentioned it was making ready information forward of the September assembly, the precise date for which might be mounted after Paetongtarn confirms her cupboard, together with the finance minister.
“We won’t set our goal in advance but will wait to see what they will propose,” mentioned Pornchai Thiraveja, head of the ministry’s fiscal coverage workplace.
“We must set a target that is appropriate.”
OPEN LETTER
Thailand’s inflation goal is reviewed yearly and have to be agreed by the BOT and finance ministry, and authorized by the cupboard earlier than the top of the yr.
The BOT has mentioned the present goal vary is functioning properly, though headline inflation averaged simply 0.11% in January-July.
The central financial institution has not met the present inflation goal vary because it was set.
Final month, Governor Sethaput Suthiwartnarueput mentioned altering the goal would put in danger credibility, inflation expectations and borrowing prices.
The central financial institution was making ready an open letter to the finance minister to clarify why inflation was outdoors the goal, according to current protocols, Piti mentioned.
In its final such letter in February, the BOT mentioned headline inflation had remained low largely due to authorities vitality subsidies that lowered electrical energy prices and retail oil costs.
“Without such aforementioned subsidy measures, average headline inflation over the previous 12 months would have resided within the monetary target range at 1.6 percent,” the letter mentioned.
Thailand’s financial progress picked as much as 2.3% within the April-June quarter from a yr earlier, however analysts mentioned fiscal coverage uncertainty clouded the outlook.
The BOT has predicted 2.6% progress for 2024, after final yr’s 1.9%.
