Thai Central Bank Governor says accommodative policy needed

  • Thailand’s monetary policy should remain accommodative to nurture the economic recovery and as inflationary pressure remains weak, central bank Governor Veerathai Santiprabhob said.
  • Thailand is still in the “early stage of a recovery of domestic demand,” Veerathai said in an interview with Bloomberg TV in Singapore on 5 Apr 18. The most important factor in deciding policy is inflation pressure, followed by the strength of the economic recovery and financial stability, he said.
  • The Bank of Thailand’s first dissenting vote on an interest-rate decision in almost three years last week sparked speculation over whether it’s edging closer to boosting near record-low borrowing costs.
  • Obstacles to an increase in the policy rate, which has been at 1.5% since 2015, include below-target inflation and the export-reliant economy’s surging currency.
  • Veerathai also weighed in on the ongoing U.S.-China trade skirmishes, noting that while the direct impact on the Thai economy “so far has been quite small,” further retaliation could cause a “quite large” disruption on the regional supply chain.
  • Several governments in Asia including Thailand are watching for an impending report from the U.S. Treasury Department that could target alleged currency manipulators.
  • “We have allowed our currency to move in line of the market’s demand and supply,” he said. “But obviously, we have been at the receiving end of global excess liquidity that at that time flushed the market in this part of the world.”
  • The central bank needs to ensure the pace of appreciation isn’t damaging to the economy as a whole, and is particularly focused on the impact of the baht’s volatility on the private sector, Veerathai said.

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