Macroeconomics/MPC

Chatrudee Theparat

The Monetary Policy Committee (MPC) cut the policy rate yesterday by 0.25% to help increase liquidity in the economic system, and reduce the burden among borrowers, as well as reduce the bond yield cost of corporate bonds, according to Deputy Prime Minister and Finance Minister Pichai Chunhavajira.

He expected that commercial banks later will help inject liquidity into the system to help SMEs operation

“As for the next round of interest rate cut, the MPC must look at trends among other countries while the inflation framework for 2024 should be around 1-3 % which can help to stimulate the production sector.

Pichai Chunhavajira

He said the reduction of the policy interest rate by 0.25% was positive to the Thai economy because it would reduce the burden among borrowers. However, the policy rate cut is probably not a point that will lead to more borrowings.

“Policy interest rates have been reduced by 0.25% also has a positive effect and helps increase confidence among investors because it reduces the burden among private companies that have to pay interest on bond yields. It also has a positive effect on the economy.

The MPC showed concern over personal debt and SME debt while the government has already pointed out as a problem. The reduction in interest rates will help to increase liquidity, especially from commercial banks. In the past, the government has already implemented various measures through state financial institutions.

Commercial institutions should increase liquidity. Now that both government and commercial financial institutions are strong, they should be able to help each other increase liquidity to better support the economy.

“After this interest rate cut, we must continue to monitor economic statistics because when we consider the statistics, we should monitor the whole region, as well as other large economies such as the direction in the United States and Europe.”

When asked if he expected the next meeting of the MPC will continue to reduce interest rates of 0.25%, Mr Pichai expected that there will be continued to monitor data on how other economies have policies on this issue

“Our economy is connected to the global economy, we have to keep an eye on what the trends are. The MPC must also follow up on this matter. When we do or don’t do something, people can sense the direction. Predictable direction It may also allow the market to predict the direction. Or someone smarter than us can take advantage of us as well.”

Inflation this year should have range 1-3% Mr Pichai said the inflation rate this year will definitely be lower than 1%. With the inflation rate less than 1%, Thailand may miss the opportunity to raise the inflation rate a bit more in order to stimulate the production sector.

“When looking ahead next year, the MPC will say that inflation rate will have more than 1% but we have kept an eye on it since the beginning of the year there were predictions that inflation would be adjust of the range between 1-3%, but at the end, it was not adjusted up as promised.”

When asked that the inflation framework should be a range of 2-3%, Mr Pichai said the finance ministry and the Bank of Thailand ( BOT ) has prepared the data and is waiting for the right time to discuss and determine the appropriate inflation framework.