Bank of Thailand to ease interest policy if euro zone debt crisis worsens

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BANGKOK, June 20 – The Bank of Thailand (BoT) will relax its interest rate policy if the euro zone debt crisis deteriorates, disrupting the euro zone and slowing down the global economy, Bank of Thailand Governor Prasarn Trairatvorakul said on Wednesday.

The current policy interest rate at three per cent is suitable for the Thai economy, he said. So far, there has been no need to do so. Neither should criteria on loan classifications be reviewed when no signs indicate the debt crisis will worsen.

The BoT relaxed its criteria for classifying bad debts after the 2011 megaflood, the governor said.

Mr Prasarn said that liquidity in the monetary system remains normal. Foreign capital inflows since the beginning of this year have been net inflows, though not in large amounts. The bond market also has a net inflow while the stock market has experienced some outflow in tandem with falling stock prices.

The central bank governor said in his statement that the bank has measures and instruments to cope with foreign capital flows. If there is a signal of capital flowing out of the country, the bank is ready to tighten measures to control it.

The BoT governor foresees the Thai economy growing at six per cent as inflationary risks have declined thanks to falling oil prices and the world economic slowdown.