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BANK OF THAILAND

BOT defends anti-inflation policy

By THE NATION

The Bank of Thailand says it is ready to consult with the new finance minister on its efforts to curb inflation but insists its current measures are reasonable.

Methee Supapong, director for domestic economy at the central bank, yesterday said the BOT was prepared to discuss the issue with Finance Minister Thirachai Phuvanatnaranubala.

"In principle, however, the inflation target of 0.5-3 per cent is relevant," he said.

His comment came after Thirachai said raising the policy interest rate to curb inflation might also hurt economic growth.

Meanwhile, Commerce Minister Kittirat na Ranong said the high interest rate had increased the cost of doing business, adding to the burden manufacturers already faced because of the high of cost of oil.

"The government does not intervene in the central bank, but concerned parties have to review policies so as to cut costs for businesses," Kittirat said. Consultation between the two sides is a good thing, said Songtham Pinto, BOT's director of macroeconomy.

"We at the central bank and the Finance Ministry have to dig into details and have to listen to each other. Ultimately, the inflation targets have been designed to manage future consumption. If we can manage this it will be all right, but if we cannot, investors will lose confidence. High inflation will wipe out profits," he said.

He said Thailand's exports had not yet been adversely affected much by uncertainty in the global economy. This was partly because exporters have diversified their markets, not only concentrating on advanced economies such as the United States, Japan and Europe.

Moreover, most export items, including rubber and petrochemical products, benefit from rising prices in the global market, he said.

However, the central bank is not complacent and closely monitors economic conditions, Songtham said.

The debt problem of the US government has existed for a long time and is not a sudden development leading to market panic, he said.

On the issue of economic growth versus the threat of inflation, he said the Monetary Policy Committee would convene on August 24 and look into the matter.

Songtham said European countries that have suffered public-debt crises had not yet addressed fundamental issues - the European Central Bank's plan to buy government bonds was only a short-term measure.

The BOT says the baht has appreciated only 1 per cent against the US dollar since early this year, so exporters should not worry about a stronger currency making their goods more expensive than competitors' in the global market.

-- The Nation 2011-08-17