Good for long-term stability, says Tarisa
By Vichaya Pitsuwan
The Bank of Thailand governor has defended her interest rate hike policy to curb rising inflation, saying the Finance Ministry has different information from the bank. Tarisa Watanagase, the central bank governor, insists that disagreement will not hamper cooperation in looking after the economy.
''Once both parties sit down, get access to the same information and consider national well-being as priority, I am confident the ministry will understand the bank's stance,'' Ms Tarisa said.
Last month, the central bank's Monetary Policy Committee (MPC) raised short-term benchmark rates for the first time in 13 months, by 0.25% to 3.5%.
Discord between the Finance Ministry and the Bank of Thailand over the interest rate policy has occurred over the last several months. The ministry fears that the rate rise could hinder economic growth.
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| Tarisa: Growth will be affected |
Deputy Finance Minister Suchart Thadathamrongvej said after taking office last Thursday that the central bank's independence did not mean it should follow a policy in conflict with that of the government.
Ms Tarisa said the bank had to consider many factors.
Virabongsa Ramangkura, the prime minister's newly-appointed economic adviser, has also criticised the bank's approach.
Ms Tarisa said she agreed with Mr Virabongsa that growth will be affected by interest rate hikes but it was only in the short term.
Putting up rates would promote long-term economic sustainability.
In the second half of the year, the Bank of Thailand expects the economy to continue to grow but at a slower pace, she said.
Investment and domestic consumption would be affected by political uncertainty and relatively high inflation.
Ms Tarisa said exports will continue to increase though local manufacturers will find that inflation has reduced their competitiveness.
Further monetary policies would be needed to support the manufacturing sector's competitiveness, she said.
However, the possibility that inflation will hit double digits has now fallen, thanks to easing oil prices and falling public expectations on inflation growth.
The government bond yield fell after the BoT raised its interest rate, reflecting a change in investor expectations that inflation would continue to rise rapidly, said Ms Tarisa.
Inflation was driven by the fuel price hike, increasing demand for products and public expectations.
Whether the central bank will raise interest rates again will depend on commerce ministry, trade and consumer price data.
She said a further slow-down in the global economy next year could reduce demand for exports, and bring down inflation over the long term.
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