Central bankers wary of risks, vow to monitor situation with the Fed
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Central bankers wary of risks, vow to monitor situation with the Fed

Ongoing political uncertainties and the volatility of capital mobilisation are risk factors that could harm the local economy and financial stability in the near future, said the Bank of Thailand.

At yesterday's meeting between the Monetary Policy Committee (MPC) and Financial Institutions Policy Committee, board members agreed the political situation and capital movement warranted monitoring.

Both committees agreed financial risks are receding following the slowdown in loan growth and household debt, but the local economy faces increased downside risks due to cooler than expected domestic consumption and private investment, as well as stagnant exports.

Political woes are eroding business confidence, said the bank in a statement.

Despite the US Federal Reserve announcing a rollback of its monthly asset purchases by US$10 billion to $75 billion in January, the committees said volatility in the financial market could continue.

However, local commercial banks are expected to be able to provide a buffer for growing economic risks, with their strong financial positions and high liquidity allowing them to extend loans to drive the country's economic growth.

In a related development, central bank spokesperson Roong Mallikamas said the baht, which depreciated 0.4% against the dollar since the Fed's announced tapering, is in line with regional peers.

Yields for local bonds have held fairly steady after the Fed's pullback plan was announced.

Despite the tapering, the global markets have not panicked as in the past because the cut was largely priced in and the Fed said it will keep its rock-bottom interest rate longer than previously promised.

The Bank of Thailand closely monitors such moves and has prepared measures that should be sufficient to handle capital mobilisation, said Mrs Roong.

Foreign investors have been net sellers of 192.21 billion baht in Thai shares this year, and 200 billion in bond markets.

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