By Aneesha Sircar and Divya Choudhury
BENGALURU (Reuters) – Thailand's new finance minister is refraining from putting pressure on the central bank, offering a chance to improve relations after years of disagreements over interest rates, says former finance minister Thirachai Pouvanatnaranuvara. said Tuesday.
Thirachai told the Reuters Global Markets Forum that Prime Minister Suretta Thavisin's repeated public calls for interest rate cuts have caused unnecessary tension, and new Finance Minister Pichai Chunhabajra is in a position to defuse the situation. said.
“The new finance minister must try to find a way to convince the Bank of Thailand of the need for a more accommodative monetary policy,” Thirachai, who is also a former central bank deputy governor, told a Reuters forum.
Sletta has been at loggerheads with the central bank for months, which has refused to bow to pressure to cut interest rates, currently at 2.50%, the highest level in more than a decade. The next interest rate review is June 12th.
Mr. Thretta and the ruling Thailand Contribution Party argue that the current monetary policy stance is harming an economy in crisis. Mr. Sletta, a real estate mogul and political newcomer, has repeatedly said he respects the central bank's independence.
The Thai Contribution Party and its predecessor, also founded by the influential former Prime Minister Thaksin Shinawatra, have dominated politics for the past two decades and have previously clashed with the People's Bank over interest rates.
Although billionaire Thaksin has officially retired, he remains an important figure in Thai politics and has influence over the current government.
His politician daughter, Pethunthaan Shinawatra, leader of the Thai Contribution Party, recently caused controversy by saying that the BOT's independence was an “obstacle” to solving economic problems.
strong position
Mr. Thirachai was also present at the BOT when the last Bank of Thailand governor was removed by Mr. Thaksin in 2001, and he said it would be difficult to do the same again now.
“The governor's position is quite strong because Thailand has a tradition of valuing and protecting the Bank of Thailand,” he said.
“We have amended the law to make it difficult for any government to remove a central bank governor unless there is a clear and necessary reason to do so.”
New Finance Minister Pichai Chunhabazira recently said he was more concerned about people's access to finance than interest rate levels. On Tuesday, he reiterated the government's position that economic stimulus is needed.
Thilachai said he thinks the current interest rate of 2.50% is probably a little high and that monetary policy should be more accommodative.
He said there was no need to worry about the baht weakening even if interest rates were cut.
The BOT says that while rate cuts may have a short-term boost to the economy, the gains could have long-term negative effects on the economy and need to be restructured.
(Reporting by Anisha Sirkar in Bengaluru and Divya Chaudhary in Mumbai; Additional reporting by Chayut Setboonsarn and Oratai Thrilling in Bangkok; Writing by Martin Petty)
