Thailand holds key interest rate at record high

The Bank of Thailand (BoT) kept its key interest rate unchanged at a meeting on Wednesday as widely expected, despite a sluggish economy and uncertain fiscal policy after the Constitutional Court removed Prime Minister Srettha Thavisin from office last week.

The central bank's Monetary Policy Committee (MPC) voted 6 - 1 to hold the one-day repurchase rate at 2.5%, the highest in more than a decade.

One MPC member voted to cut the policy rate by 0.25 percentage point to reflect Thailand's lower potential growth as a result of structural challenges, and to partly alleviate debt-servicing burden for borrowers.

The monetary authority has kept the key rate steady since the fourth quarter of 2023 even as inflation has stayed below the BoT's target of 1-3%.

The decision to keep borrowing costs at the highest level since 2013 comes as new Prime Minister Paetongtarn Shinawatra picks her team and formulates policies, including reviewing the government’s THB 450 billion ($13 billion) household handout scheme planned by her predecessor Srettha Thavisin.

The BoT had resisted calls from Srettha to cut rates while urging him to implement a more-targeted stimulus programme.

While Southeast Asia’s second-largest economy grew at the fastest pace in five quarters in the April-June period, it continues to lag behind the expansion of its neighbours.

Pichai Chunhavajira, who continues as caretaker finance minister while Paetongtarn finalises her team, described the $500 billion economy as "near crisis".