BOT chairman supports rate cut
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Bank of Thailand Chairman Virabongsa Ramangkura pressured the central bank to lower the policy rate, insisting that it would be the most effective way to deter foreign capital inflows.
At the Thailand Institute of Directors-hosted seminar on "Thailand's Economic Outlook 2013", he said that the central bank's policy to weaken the baht appreciation through more overseas investment by Thai companies is just a medicinal inhaler.
"It's not the right medicine," he said.
Virabongsa, also chief economic advisor to Prime Minister Yingluck Shinawatra, said that quantitative easing measures in developed markets are injecting huge liquidity into the financial market. Excess liquidity is going to risker assets, like the stock and bond markets in developing countries, to reap a higher return. While US rate is only 0.25 per cent, Thailand's policy rate is 2.75 per cent. He said that continued inflows could cause bubbles in the financial market and the property market.
"I think that with the wide gap of US and Thai interest rates, inflows would continue. This will increase (a chance of) bubbles in the stock market, while the Bank of Thailand's intervention ability would be limited. I think a cut in policy rate is the only way to block the inflows," he said.
