Central bank sees need for higher policy interest rate

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Central bank sees need for higher policy interest rate
TNA 2011-03-1

BANGKOK, Mar 1 – Bank of Thailand (BoT) Assistant Governor Paiboon Kittisrikangwan on Monday said the central bank remained worried about the trend to higher inflation, saying it sees the need to further raise the policy interest rate to contain rising inflation.

At present, he said, the central bank’s Monetary Policy Group is assessing how much the continued increase in global crude prices due to mounting violence in the Middle East will affect Thailand’s economic growth, inflationary pressure, and public expectations about the inflation rate.

Such factors must be raised for discussion at the Monetary Policy Committee’s meeting March 9.

“The current inflationary pressure stems from both rising global oil prices and increasing consumer product prices. The government, therefore, has the idea of raising the minimum wage continuously for two years.

“Both factors have an impact on economic growth. The central bank must consider implementing its monetary policy with caution. The interest policy adopted by the bank must focus more on enhancing long-term stability than on responding to what happens in the short run,” he said.

Although the policy interest rate had gradually increased, it is relatively very low given the country’s continued economic growth, particularly in January.

“Should inflationary pressure mount markedly and the public expectation of the inflation rate continue rising, raising the policy interest rate to a balanced level must happen. The move reflects the central bank’s intention and capability to oversee the country’s inflation to ensure it stays at a low level,” he said. (MCOT online news)