MPC keeps benchmark rate at 2.75%
- Published: 20/02/2013 at 03:18 PM
- Online news:
The Bank of Thailand's Monetary Policy Committee (MPC) has kept its benchmark interest rate unchanged at 2.75%.
The committee members on Wednesday afternoon voted six to one not to cut the policy interest rate because they believed the current rate was in line with the overall economic situation.
The MPC said the global economy was more stable and Thailand's gross domestic product growth was higher than expected in the fourth quarter of 2012, while the inflation rate continued to increase because of fuel prices.
The country's GDP grew by 18.9% in the previous quarter.
The next MPC meeting will be on April 3, 2013.
Virabongsa Ramangkura (Photo by Kosol Nakachol)
Virabongsa Ramangkura, the central bank chairman, said Thailand is an attractive place for "hot money" - or money moved around quickly to profit from international rate fluctations.
The former finance minister commented on efforts to stem capital inflows at a seminar in Bangkok late Tuesday.
"Thailand is an attractive place for hot money because our regulations are not that tight like China," Mr Virabongsa said.
"I am concerned, but not panic-stricken yet. There have been huge inflows to stocks, bonds and property. The situation may be similar to 1994-1995. Land prices in some areas, like by the sea, have risen more than 10-fold."
"Our economic growth at 4% to 5% is not enough to cope with such an increase. When money flows in, many people, especially investors in stocks and properties, are happy. I just hope that we have learned our lesson during the crisis and that laws and bank rules have been improved."
"Money is like water. It will flow from low- to high-yield places. No matter what regulations or barriers you have, it will always find a way.
"I can't think what measures we should use to slow it down.
"Using a Tobin tax [excise on cross-border currency transactions] is not easy. Any direct controls like reserve requirements or non-market measures have strong side-effects.
"If prices of property and financial assets increase enough, investors will suffer a lot when they fall. So no government will be willing to use such drastic measures."
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