BoT: No need to cut rates

Thailand doesn't need an interest-rate cut as credit growth is accelerating and domestic demand is countering a slowdown in exports, Bank of Thailand Governor Prasarn Trairatvorakul said on Saturday.

Inflation remains benign and Southeast Asia's second-largest economy is estimated to grow 5.7% this year, Dr Prasarn said in an interview with Bloomberg News in Tokyo, where he is attending the annual mIMF and World Bank meetings.

The central bank's Monetary Policy Committee will hold its next meeting on Wednesday and is widely expected to leave the benchmark one-day repurchase rate of 3% untouched.

The Bank of Thailand has refrained from adding to its November and January rate reductions as the country recovered from its worst floods in almost seven decades.

Prime Minister Yingluck Shinawatra's populist Pheu Thai government has boosted state spending and raised government salaries, while demand for loans has risen.

"We don't see necessity at the moment to use monetary policy to restore confidence because the market is already quite confident," Dr Prasarn said.

"Exports are coming down but domestic demand is still very strong to compensate."

Consumer price inflation rose to a six-month high of 3.38% in September, a pace the central bank has said is in line with its expectations and not worrisome. Core inflation was 1.89%, below the 3% target that the monetary authority seeks to avoid breaching.

Total bank loans climbed 14.2% in the second quarter from a year earlier, accelerating from 13.9% in the previous three months.

The dollar value of Thai exports fell 6.95% in August from a year earlier, dropping for a third consecutive month as demand for products from electronics to rubber declined.

The IMF earlier this week cut its projections for global expansion this year and next, saying it sees alarmingly high risks of a steeper slowdown.

"The central bank has room to ease monetary policy if needed," Dr Prasarn said. "If the slowdown in the world markets curbs exports to the level that Thai businesses suffer, the central bank will act.

"There are no alarming signs of asset bubbles in Thailand," the governor added. "The baht hasn't come under serious pressure and the central bank hasn't had to intervene in the currency."

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Writer: Bloomberg