Bloomberg News

Thailand Can Ease Monetary Policy If Economy Slows, Prasarn Says

May 21, 2013

Bank of Thailand Governor Prasarn Trairatvorakul said monetary policy could be eased if the economy loses momentum, signaling he may cut interest rates next week after slower-than-estimated growth last quarter.

“Our monetary policy aim is to maintain equilibrium in the economy,” Prasarn told reporters in Bangkok today. “If we see that economic momentum slows, we can ease monetary policy to take care of that.”

The government yesterday lowered its full-year growth forecast after the economy expanded 5.3 percent in the first quarter from a year earlier, less than economists estimated. Arkhom Termpittayapaisith, secretary-general of the state planning agency, said he is “worried about the second quarter,” adding that monetary policy could address the slowdown and also help curb inflows that have boosted the baht.

The baht rose 0.3 percent to 29.72 per dollar as of 1:25 p.m. in Bangkok, after earlier climbing to its highest level in two weeks as concerns that the government will impose curbs on capital inflows abated. The currency strengthened last month to its highest level since July 1997, and is the best performer in Asia this year, according to data compiled by Bloomberg.

While the baht may be volatile amid global uncertainties, the central bank is ready to intervene if needed, Prasarn said, adding that the Bank of Thailand will analyze first-quarter data before deciding on the policy rate.

The monetary policy committee is scheduled to meet on May 29. It has held the key rate at 2.75 percent since a 25-basis-point reduction in October, citing risks to the nation’s financial stability.

Thailand’s state agency yesterday lowered its full-year forecast for gross domestic product to 4.2 percent to 5.2 percent from 4.5 percent to 5.5 percent. It also cut its export growth target for the year to 7.6 percent from 11 percent.

Finance Minister Kittiratt Na-Ranong, who has led calls for lower rates, yesterday said the government has no plans to issue “abnormal measures” to stimulate the economy, even as it is concerned about the first-quarter numbers.

To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at suttinee1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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