Governor Prasarn Trairatvorakul has reaffirmed that the central bank's stance on monetary policy is to focus on long-term sustainability, not to serve a short-term focus or single objective.
Bank of Thailand governor Prasarn Trairatvorakul gave an address on the economic outlook after presiding over Investment Expo 2013 at the Queen Sirikit National Convention Center yesterday. The event runs until Sunday and was organised by ‘Post Today’, a ‘Bangkok Post’ sister paper celebrating its 11th anniversary this year. PORNPROM SATRABHAYA
Finance Minister Kittiratt Na-Ranong yesterday urged the Bank of Thailand to opt for a lower interest rate, though the decision will ultimately be made by the Monetary Policy Committee (MPC) and its seven members _ four of whom come from outside the central bank.
Mr Prasarn yesterday said the central bank considers many aspects when taking a position on monetary policy. He acknowledged that the differential between local and foreign interest rates often plays a role in the movement of foreign capital.
He was responding to the renewed conflict between the government and the central bank over rates, ahead of a Feb 20 MPC meeting that will decide whether to leave a key rate at 2.75%.
"The central bank would not decide on interest rates based on a single factor," said Mr Prasarn.
He named long-term economic stability as the central bank's priority, saying the MPC analyses local data rather than following the trend of the US and Japan as suggested by some.
"There are more factors than interest rate differentials that determine the trend of foreign capital flows," said Mr Prasarn.
The governor took issue with the notion that the central bank should cut interest rates to discourage capital flows and avert a financial bubble, saying lower rates might lead investors to seek better returns and spur speculation.
Meanwhile, Mr Kittiratt dubbed the current interest rate "way too high".
"This is the opinion of the finance minister, but the one who has the final say is the MPC," he said. "So I would say that when other people voice their opinion, the MPC should open their minds and take this into consideration."