BoT rejects any new policy easing

BoT rejects any new policy easing

The Bank of Thailand has pointed out that public spending is a major engine of economic growth, signalling that further easing of monetary policy is not the right approach to support expansion.

The current interest rate is not a hindrance to business or expansion, central bank spokesman Chirathep Senivongs Na Ayudhya said.

"Public spending rather than monetary policy is the main economic driver, as it can help boost private investment," he said.

The Finance Ministry recently raised its budget disbursement target for the first quarter of fiscal 2015 to 30% from the regular 25% in a bid to expedite the pace of growth during the October-December quarter and offset anticipated delays in export recovery.

The move came amid mounting concerns that GDP may expand by less than 2% this year.

Regarding the National Council for Peace and Order's recent approval in principle of a price hike for liquefied petroleum gas and natural gas for vehicles, Mr Chirathep said it would not fan inflationary pressure, as the government still subsidised the fuels at a certain level.

In the event that their prices are freely floated to the same level as global prices, inflation would rise by a mere 0.01 percentage points, he said.

Meanwhile, Somboon Chitphentom, the central bank's senior director of regulatory policy, said financial institutions offering Basel III-compliant tier-2 subordinated bonds to the public should simplify them to enable retail investors to understand the risks.

"The debt instrument with loss absorption is fairly complicated and carries higher risks than plain debt papers as its features are similar to equities rather than debt instruments," he said. "The Bank of Thailand would like banks planning to sell such notes to the public to educate people about them to prevent any possible damages."

The Securities and Exchange Commission has given the green light for banks to offer tier-2 subordinated debt issues, which can be converted to equities for retail investors to help absorb the massive supply from the rollover of billions of baht worth of these securities set to start this year.

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