BOT studies likely impact of QE4
The Bank of Thailand expects the US Federal Reserve's fourth round of quantitative easing (QE4) to boost liquidity in money markets, which could prompt more capital to flow into Asia.
Prasarn Trairatvorakul, BOT governor, said the central bank was assessing the likely impacts from the expected higher capital levels and possible flow of funds into Asia.
"We have not seen the minutes of the US meeting. Earlier, the Fed limited the amount to purchase only mortgages, as it needed to help the property sector.
"This round’s purchase is extended to the US government, as money-market rates need to be maintained, and this will help stimulate employment," Prasarn said.
He said QE4, which was an unexpected additional measure, could be a result of the Fed’s additional duty to help ease the unemployment situation in the United States.
"The central bank’s duty is to oversee monetary stability. It [the Fed] has an additional fiscal burden.
"Actually, fiscal measures should be used in this situation. But the Fed has to take care of this, as there could be limited tools at its disposal.
"Thus the Fed has to use non-traditional monetary policy through money-printing," Prasarn said.
Regarding the BOT’s money-market supervision, he insisted he would not move against the market mechanism unless absolutely necessary, because of its high financial costs.
stepping back to |lessen volatility
In the past two or three years when money markets have |been through periods of high volatility, most central banks have limited intervention to lessening such volatility, to allow the business |sector to make its own adjustments.
Prasarn said the levels of capital movement into each country depended not only on interest rates, but also on the particular country’s economic fundamentals.
