The Monetary Policy Committee Uses Interest Rate To Stimulate Economy

[Jai Dee]

The Monetary Policy Committee using interest rate to stimulate economy

The Monetary Policy Committee under the Bank of Thailand (BOT) has lowered the inflation rate for this year to 4.75 percent. It is for the first time in two years that the committee has decided not to increase the inflation rate.

The Monetary Policy Committee regularly holds a meeting to oversee Thailand’s economic stability, especially the inflation rate. Assoc. Prof. Montree Sokhatiyanurak , the financial expert from th National Institute of Development Administration (NIDA), said in the past, the central bank usually used the interest rate to send financial signals. The bank issued bonds with the 14-day repurchase rate (RP14), but following the changes in the bond exchange market due to the overall economic stability, the one-day repurchase rate have been used instead.

Assoc. Prof. Montree said the committee has signalled that the economy needs stimulation as it is becoming sluggish. It concerns on spending behaviours of people and the amount investment in the private sector. He concluded that the reduction of interest rate is the stimulator.

Assoc. Prof. Montree said the BOT’s decision to cut down the inflation rate can help mobilize the economy and may also boost the export sector. He said there is a tendency that the inflation rate will decrease further. However, the BOT will have to wait for the decision of the US Monetary Policy Committee on the interest rate’s adjustment in the future.

Source: Thai National News Bureau Public Relations Department - 22 January 2007