(Bloomberg) -- Thailand central bank Governor Sethaput Suthiwartnarueput reaffirmed on Wednesday that the monetary authority is ready to adjust borrowing costs if needed, while maintaining policy space for unexpected risks.
Bank of Thailand “stands ready to adjust as circumstances mandate,” Sethaput told a forum organized by the Stock Exchange of Thailand. “We are not dogmatic. We need to be pragmatic and flexible. We will be guided by behaving in a prudent way.”
Policymakers are closely watching the deterioration in credit quality and how it affects liquidity and the broader economy, although at this point, they don’t expect it “to fall off the cliff,” the governor said. He also expressed concerns over the widening gap between growth in consumption and manufacturing that’s hurting from imports, especially from China.
These issues may pose additional hurdles to Southeast Asia’s second-largest economy that has expanded below 2% annually in the past decade unlike neighbors that have regained their pre-pandemic growth of 5% or higher.
In the past week, the BOT — which has pushed back against monthslong calls from the government to cut rates from a decade-high — have indicated more openness to supporting the economy should it weaken further. Still, the latest remarks from the governor also suggested that Thailand won’t join the global easing pivot just yet.
The BOT kept its benchmark interest rate at 2.5% on Aug. 21 for a fifth straight time. With only two more meetings left this year, Sethaput reiterated on Wednesday that the central bank will remain outlook dependent instead of data driven. This comes as nation’s new leader Paetongtarn Shinawatra is still finalizing her cabinet and reviewing a $14 billion cash handout planned by her predecessor, Srettha Thavisin.
At 2.5%, Thailand’s key rate is among the lowest in the world, Sethaput said. The Philippines has cut its key rate by a quarter-point last week to 6.25% while Indonesia has signaled it may reduce borrowing costs from 6.25% next quarter.
There have been a lot of unexpected shocks in the past decade, which “put a premium in trying to run the monetary policy in a resilient and in a robust manner,” Sethaput said. “Trying to set the policy in a way that being roughly right under many circumstance is better than trying to get it exactly right, and you end up being exactly wrong.”
The BOT, said the governor, is also closely monitoring the baht which has strengthened significantly this month against the dollar, along with regional currencies. The Thai currency has appreciated due to dollar weakness as well as due to rising gold prices, he said.
The baht, which has climbed almost 5% this month, extended gains on Wednesday, rising by 0.2% against the dollar at 2:04 p.m. local time.
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