Thailand to Name Critic as Central Bank Chair, Reports Say

Suttinee Yuvejwattana
·3-min read

(Bloomberg) -- Thailand is set to appoint former Finance Minister Kittiratt Na-Ranong as the new Bank of Thailand chairman, a sign of the government seeking to tighten its grip over the central bank with which it has sparred over monetary policy and inflation targets. The baht slumped.

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Kittiratt, a critic of the BOT’s hawkish monetary policy and a former member of the ruling Pheu Thai party, was picked as the new chairman at a near five-hour meeting of the selection panel on Monday, according to people familiar with the matter. Thai media earlier reported that Kittiratt was selected.

While the BOT chairman doesn’t decide on policy, Kittiratt will have a say in who joins the Monetary Policy Committee and can assess the performance of the governor. He was nominated by Prime Minister Paetongtarn Shinawatra’s government that has kept on pushing the central bank to cut rates even after it surprised markets last month by lowering borrowing costs for the first time since 2020.

Sathit Limpongpan, who headed the committee to select the new BOT chair, said a decision was made on Monday. He didn’t disclose who was picked, saying in a statement that the cabinet and Thailand’s monarch would have to endorse the decision.

Pornchai Thiraveja, a spokesman for the Ministry of Finance, couldn’t be immediately reached for comments.

The baht fell as much as 1.1% against the dollar on Tuesday, its lowest level since Aug. 19, and was the worst-performer among Asian emerging market currencies after the dollar index rallied for a third day. Foreign funds have pulled a net $1.8 billion from Thai bonds so far in the fourth quarter, dragging the baht down around 7% during the period.

Kittiratt has slammed the monetary authority for not lowering rates to boost growth when he served as an economic adviser to Srettha Thavisin before he was ousted as prime minister earlier this year. When Kittiratt was finance minister in Yingluck Shinawatra’s cabinet in 2013, he also publicly pressured then-central bank chief Prasarn Trairatvorakul to cut rates.

If confirmed, Kittiratt’s appointment increases the risk of more rate cuts by the central bank compared with Nomura Holdings Inc.’s baseline forecast of one more 25 basis point cut in December, economist Euben Paracuelles said.

Although the timing of the next cut remains uncertain, “it’s possible the BOT may be more aligned with the government in terms of providing support to the economy,” he said.

The central bank had nominated former energy ministry official Kulit Sombatsiri and Surapon Nitikraipot, an academic.

Opposition

Ahead of the selection panel’s decision, a group of former Thai central bank chiefs and economists had urged them not to pick a political representative as the BOT chair as the person would serve the short-term interests of the political parties, damaging economic stability.

The government and the BOT have differed on the best way to boost Southeast Asia’s second-largest economy that’s lagged the expansion pace of its neighbors in the past decade. While Paetongtarn’s administration is pushing for a lower interest rate to complement its expansionary fiscal policies, the conservative central bank has stuck to a cautious approach.

Paetongtarn, former premier Thaksin Shinawatra’s daughter, hasn’t commented about monetary policy since taking office in September, but she once described the BOT’s autonomy as “an obstacle” to government efforts to boost the economy. Her administration has passed a bigger budget and handed out some $4 billion in cash to vulnerable groups to ease living costs.

Last month, the BOT prevailed over the Finance Ministry to retain the inflation target for next year at 1% to 3%. While it was a win for the monetary authority, it agreed to the ministry’s demands to use a mix of policy tools to bolster the economy and closely monitor baht moves.

--With assistance from Marcus Wong.

(Updates with baht performance in sixth paragraph, adds baht chart.)

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