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Fresh battle bubbling over whether to cut policy rate
The Nation

BANGKOK: -- A new battle is brewing between the government and the Bank of Thailand, with one camp pushing for an interest-rate cut to help the export sector and the other doubting the case for such a move.

The government and the National Economic and Social Development Board are apparently upset with Bank of Thailand Governor Prasarn Trairat-vorakul's comments this week about the NESDB's consumption figures being "much lower" than central bank estimates.

Weaker consumption exacerbated economic conditions in the first quarter, as the export sector is suffering from a weak global demand.

But PM Yingluck Shinawatra said yesterday that the official think-tank's figures were not being used to press for a rate cut. The NESDB was merely doing its job in revising downward the full-year growth forecast, and the Monetary Policy Committee (MPC) still has full independence in reaching a decision on the policy interest rate, she said.

However, she favoured a rate cut to spur the economy.

At yesterday's Cabinet meeting, she also instructed the Finance Ministry and other key agencies such as the Commerce and Industry ministries to closely monitor economic activity.

Weaker-than-expected growth in the first quarter, leading to the revision of the NESDB's full-year forecast, raises the odds that the central bank will cut the policy rate at the MPC's meeting on May 29.

Prasarn, meanwhile, acknowledged that monetary easing was possible, should the economy lose momentum. "Our monetary-policy aim is to maintain equilibrium in the economy. If we see that economic momentum slows, we can ease monetary policy to take care of that," he said.

The governor expressed surprise that domestic consumption was low, given quarterly loan growth of more than 13 per cent.

The central bank had forecast quarterly growth at 7.1 per cent, against the actual figure of 5.3 per cent announced by the NESDB.

Domestic consumption grew by just 4.2 per cent in the period, against the central bank's forecast of 5.8 per cent, while private investment expanded by 3.1 per cent year on year, compared with the bank's 7.3-per-cent forecast.

Poramathee Vimolsiri, deputy secretary-general of NESDB, said all consumption indicators had contracted in the quarter, except the automotive sector, which benefited from the first-car buyer scheme. "But for the [122 per cent] rise in auto sales, consumption could have been lower," he said.

Deputy PM and Finance Minister Kittiratt Na-Ranong, meanwhile, said the central bank had submitted details of proposed legal amendments to pave the way for implementation of four baht-intervention measures.


-- The Nation 2013-05-22