Day before policy review, Thai PM urges central bank to cut rates By Reuters

By Orathai Sriring and Kitiphong Thaichareon

BANGKOK (Reuters) -On the eve of a Thai central bank meeting expected to leave interest rates unchanged at a decade high, Prime Minister Srettha Thavisin called again on Tuesday for a cut in borrowing costs to revive economic growth.

The prime minister, who is also the finance minister, has been at loggerheads with the central bank over the direction of monetary policy, arguing the economy needed support and inflation was not a threat.

“If there is a crisis or something happens, it can still be reduced a lot. Why don’t we start doing it today?” he said, warning that after four straight months of falling consumer prices, the country faced the risk of deflation.

Inflation is below the lower end of the central bank’s target range, so even if interest rates were cut from their current level of 2.50% to 2.25%, there would be “a lot of room” for further cuts, he told reporters.

Despite the pressure, the Bank of Thailand (BOT) is expected to leave its policy rate unchanged at a scheduled review on Wednesday, a Reuters poll showed.

BOT Governor Sethaput Suthiwartnarueput recently told Reuters that monetary policy was “broadly neutral” and the economy was not in crisis.

Srettha said fiscal and monetary policy must work together to help revive Southeast Asia’s second-largest economy, which he has described as in crisis.

“I believe we still can work together,” he said, referring to the central bank.

Srettha – a real estate mogul and political newcomer – has repeatedly said the economy needs a big boost and his government will forge ahead with a controversial $14 billion handout scheme, though it might be delayed, pending more consultation.

The so-called “digital wallet” scheme would transfer 10,000 baht ($280) each to 50 million Thais to spend in six months, but has been hounded by concerns over how it will be funded, with some experts calling it fiscally irresponsible.

Deputy Finance Minister Julapun Amornvivat said on Monday the government would meet to discuss the handout scheme next week and was sticking with the current plan for now.

It will also push for a borrowing bill to finance the programme, he said.

($1 = 35.64 baht)