FTI calls for policy rate cut
- Published: 15/03/2013 at 04:16 PM
- Online news:
The central sbank should cut the key repurchase rate by 0.5 percentage points to curb the baht’s rapid appreciation, Wallop Witanakorn, vice chairman of the Federation of Thai Industries (FTI), said on Friday.
The continued strengthening of the baht had prompted the Bank of Thailand (BoT) to intervene in the money market, Mr Wallop said.
But these measures were unlikely to enable to curb the baht's strength because as much as 28 billion baht in foreign direct investment had flowed in to buy government bonds last week.
Therefore, at its next meeting on April 3 the Bank of Thailand's the Monetary Policy Committee (MPC) should consider cutting the key policy rate to 2.25% from the current 2.75%, he said.
The strong baht problem needs a strong remedy like a sharp cut in the policy rate to prevent foreign direct investment from flowing in to take a profit from interest margins, said the FTI vice chairman.
A rate cut would be a short-term measure. It could be be done and it should be done soon, otherwise it would be too late as foreign investment inflow was expected to continue.
Thai baht is much stronger than other currencies in the region, due to Thailand’s higher interest rate, he added.
Mr Wallop said the private sector was concerned about orders in the second and third quarters of the year, because they could not set suitable prices for their products.
If manufacturers take orders at low prices and the baht becomes much stronger, they will face business losses, he said. Manufacturers want stability in the Thai currency, not a rapid appreciation as was happening at this time.
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- Writer: Online Reporters
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