Interest rate direction depends on euro zone debt crisis

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BANGKOK, June 26 – There is no need for the Bank of Thailand (BoT) to lower its key interest rate, unless impacts from the euro zone debt crisis become worse than anticipated and inflation as well as the gross domestic product (GDP) is not within the anticipated range.

Narongchai Akrasanee, a member of the BoT Monetary Policy Committee (MPC) said that inflation is likely to be around three per cent as projected by the Bank of Thailand, obviously favoured by dropping global oil prices.

The National Economic and Social Development Board (NESDB) assessed the impact of the euro zone debt crisis and remains confident that the Thai economy will grow 5.5-6.5 per cent. The MPC applied the monetary policies to oversee the inflation along with the economic growth rate.

Mr Narongchai conceded however that if impacts from the euro zone debt crisis become worse than earlier anticipated and GDP growth is less than five per cent, it is possible that the MPC will decide to cut its policy interest rate to stimulate the economy.

The government should speed up implementation its investment projects on flood prevention and infrastructure to boost the domestic economy and ease the impacts from the euro zone crisis, he suggested.

Regarding goods prices, Mr Narongchai said he does not agree with the commerce ministry’s plan to issue price control measures for some consumer goods and cooked meals as it can negatively affect traders with low incomes and no welfare benefits.

The government should support free market competition, he said, reasoning that prices of cooked meals such as rice with curry have no significant impact on inflation which mainly relies on oil prices.