(Bloomberg) -- Thailand’s cabinet endorsed a deal to keep the official inflation target unchanged in 2025, a victory for the Bank of Thailand after it resisted calls for a higher goal that would have paved the way for more rate cuts.
Cabinet endorsed an agreement between the central bank and Ministry of Finance to keep the inflation target in a range of 1% to 3%, Deputy Finance Minister Julapun Amornvivat said after a cabinet meeting chaired by Prime Minister Paetongtarn Shinawatra in Bangkok on Tuesday.
Thai authorities have now agreed for a fifth straight year to keep the target range, even though actual inflation often undershoots as high household debt weighs on consumer spending and product prices. The agreement also signals an easing of tensions between the central bank and Paetongtarn’s government after clashes over interest rates and the best way to revive the economy.
The central bank ignored government calls to lower borrowing costs by leaving the benchmark rate unchanged at 2.25% last week, saying the current neutral stance was appropriate for the economy amid rising global uncertainties.
Read: Bank of Thailand Defies Government Over Rates, Seeing Risks
Keeping the price band at a moderate level is expected to provide the central bank with enough firepower to deal with future risks as US President-elect Donald Trump threatens to impose steep tariffs on imports.
Under Thai regulations, the Finance Ministry and the BOT must agree on the price goal before it’s adopted as the official target.
Inflation has undershot the central bank’s target this year, averaging 0.3% in the first 11 months, though the central bank expects it to return to the lower end of the range this month. It was 0.95% in November, below the lower end of the official target for a sixth straight month.
The gauge is forecast to average 1.1% next year as medium-term inflation expectations are well anchored within the target, the Monetary Policy Committee said last week.
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