'BOT under no pressure to cut rate'
Bank of Thailand Governor Prasarn Trairatvorakul maintained that the Monetary Policy Committee was under no pressure, despite the renewed attempt by Finance Minister Kittiratt Na-Ranong to force a cut in the benchmark interest rate.
“All MPC members are mature. They will review all data. Whatever the resolution will be, the MPC will be ready to explain,” Prasarn said.
The MPC will convene tomorrow, a week after the National Economic and Social Development Board revealed apparently dismal first-quarter data, which led it to revise the full-year growth forecast from 4.5-5.5 per cent to 4.2-5.2 per cent. The first-quarter growth of 5.3 per cent was lower than the BOT’s 7-per-cent forecast and Bloomberg’s 6-per-cent consensus.
Prasarn was surprised that some figures were worse than the central bank’s expectation. A BOT team is looking into the details of the differentials and the governor is hopeful that the study will be completed for the MPC’s consideration. “This will shed light on the growth momentum.”
Kittiratt yesterday said the policy rate, now at 2.75 per cent, must be cut by more than 25 basis points. He hopes that the lower rate will weaken the baht and boost export demand.
“If the rate is not cut, or cut by only 25 basis points, the MPC is oblivious of the situation. It is so, even when the rate is cut by 50 basis points,” he said.
Thailand’s exports in the first quarter expanded only 4.3 per cent, on weak global demand particularly from China as well as the stronger baht. The currency has, however, weakened to near 30 per US dollar, from its peak of 28.53 in April.
External factors are mixed. While recession hurts Europe, the US economy shows some improvement and that country’s Federal Reserve is considering a reduction in bond purchases. China signalled a tolerance for slower expansion to reduce environmental damage. Amid the mixed condition, the Stock Exchange of Thailand yesterday joined other Asian bourses’ falls. The SET Index lost 0.89 per cent to 1,593.10 points.
Prasarn said to help limit foreign-exchange volatility on Thai exports, the BOT was further promoting the use of the baht for border-trade settlements. Now, baht settlements account for 10 per cent of total border-trade value, compared with zero in 1993. The use of the Thai currency now covers CLMV (Cambodia, Laos, Myanmar and Vietnam) countries and Malaysia, and the volume will grow in line with border-trade value, he said. The BOT is also pushing for baht-denominated invoices.
