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Thai central bank to implement monetary policy based on core inflation

BANGKOK, Feb 23 – Bank of Thailand (BoT) Governor Prasarn Trairatvorakul on Tuesday affirmed the central bank would continue implementing monetary policy by taking into account the country's core inflation.

He said that the core inflation rate is not vulnerable to temporary factors because it does not factor in energy and fresh food prices. Although instant food prices are used in the calculation, they do not have an adverse impact on the inflation change.

The headline inflation rate has an advantage since the public are familiar with it. But it takes into account the energy and fresh food prices, which have fluctuated seasonally.

Inflation rates of both kinds have different pros and cons, but at present, the bank will continue using the core inflation rate because any change in the method would have an impact on the target inflation, which could confuse the public due to its complexity.

Speaking of the escalating violence in Libyan protests, Mr Prasarn said it would not directly impact the Thai economy because Thailand has a small trade with Libya, which is situated far from Thailand.

However, the bank must closely monitor the indirect impact because the violence, if persistent, would fuel a global oil price hike.

The situation could finally impact the global economy since Libya is a North African country which has thousands of oil wells and is a major supplier.

The BoT chief said he saw nothing unusual with the current capital flows as the baht had moved in a narrow range at present. (MCOT online news)

-- TNA 2011-02-23