Thailand: FPO asks BoT to drop interest rate – 25 Sep 2017

  • The Finance Ministry has urged the Bank of Thailand to slash the policy rate by 50 basis points to help stimulate the economy and curb speculative inflows.
  • Fiscal Policy Office deputy director-general Warotai Kosolpistkul said the ministry’s think tank also asked the central bank to abandon inflation-targeting as its monetary policy framework amid low inflation.
  • If the repurchase rate is kept unchanged at 1.5%, overseas funds will continue to flood into Thailand for arbitrage, he said.
  • The Bank of Thailand’s Monetary Policy Committee has left the policy rate unchanged at 1.5% since a cut in Apr 15 due to uneven economic recovery. The MPC meeting on the interest rate is due on 27 Sep 17.
  • The baht has gained more than 8% in 2017 against the US dollar, making it Asia’s best performing currency, raising fears that the baht’s rise will take a toll on exports, which are gaining momentum.
  • Mr Warotai said the central bank’s inflation targeting, aimed at driving stable economic growth, is no longer effective, as seen by the fact that inflation is below the lower-end of the targeting band.
  • The central bank in 2016 also failed to achieve the inflation target.

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