By Anisha Sircar and Divya Chowdhury
BENGALURU (Reuters) – Thailand’s new finance minister has refrained from pressuring the central bank and has a chance to improve relations amid a longstanding disagreement on interest rates, former finance minister Thirachai Phuvanatnaranubala said on Tuesday.
Speaking in the Reuters Global Markets Forum, Thirachai said Prime Minister Srettha Thavisin’s repeated public push for a rate cut had created unnecessary strain and new Finance Minister Pichai Chunhavajira was in a position to smooth things over.
“The new finance minister must try to find a way to convince the Bank of Thailand there is a need for a more relaxed monetary policy,” Thirachai, who is also former central bank deputy governor, told the Reuters forum.
For months, Srettha has been at odds with the central bank, which has refused to bow to his pressure to cut rates, currently at a more than decade-high of 2.50%. The next rate review is on June 12.
Srettha and his ruling Pheu Thai Party maintain the current monetary policy stance is hurting an economy he says is in crisis. Srettha, a real estate mogul and political newcomer, has repeatedly said he respects the central bank’s independence.
Pheu Thai and previous incarnations also founded by influential former premier Thaksin Shinawatra have dominated politics for the past two decades and have clashed previously with the BOT on rates.
Billionaire Thaksin has officially retired but remains a towering figure in Thai politics, with sway over the current government.
His politician daughter and Pheu Thai leader Paetongtarn Shinawatra recently caused a stir, calling the BOT’s independence an “obstacle” in resolving economic problems.
STRONG POSITION
Thirachai was at the BOT the last time a Thai central bank governor was sacked in 2001, by Thaksin, a move he said would be difficult to repeat now.
“The position of the governor is fairly strong because Thailand has a tradition of giving weight and protection to the Bank of Thailand,” he said.
“We had amended the law to make it difficult for the government, for any government, to remove the central bank governor, unless there is a real, apparent, necessary cause.”
New Finance Minister Pichai Chunhavajira has recently said he is more worried about people’s access to finance than the level of interest rates. On Tuesday, he reiterated the government’s position that economic stimulus was needed.
Thirachai said he believed the current interest rate of 2.50% was perhaps a little high and in his opinion, monetary policy should be more relaxed.
He said there should be no concern over weakness of the baht curreny if there were to be a rate cut.
The BOT has said a rate cut could give the economy a short-term boost, but that benefit would be outweighed by potential long-term negative impacts it might create on the economy, which needed to be restructured.
(Reporting by Anisha Sircar in Bengaluru and Divya Chowdhury in Mumbai; Additional reporting by Chayut Setboonsarng and Orathai Sriring in Bangkok; Writing by Martin Petty)
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