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Thai central bank: Rate rise depends on oil price

 

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August 17, 2008

Thai central bank: Rate rise depends on oil price
Thailand's central bank said on Saturday there was room for further monetary policy tightening this year, but the decision at the next meeting on Aug. 27 would depend on oil prices, reported Reuters.

"For interest rates, there is room for increases, but we will consider whether the economy can take it or it is needed," Bank of Thailand Deputy Governor Atchana Waiquamdee told reporters on the sidelines of a seminar on the economy.

The central bank raised interest rates in July -- its first rise in two years -- to fight oil-fuelled inflation, which hit a 10-year high of 9.2 percent that month. However, oil prices have recently dropped sharply, reducing inflationary pressure.

"Falling crude oil prices may be the signal of a slowdown in the global economy, which could have side-effects on the Thai economy and exports," Atchana said. "If we are unsure, a decision may not be made, neither up nor down."

 

The central bank will also have to consider the impact from recent government stimulus measures, which included a cut in consumer taxes for petrol, free bus and train rides, and reduced power and water charges.

On Friday Governor Tarisa Watanagase said the central bank may reconsider its hawkish stance on the need to tighten monetary policy as the inflation rate may not reach double-digits after the recent fall in oil prices.

Atchana said that in the second half of the year the economy was expected to slow, but she reaffirmed the central bank's full-year growth target of 4.8-5.8 percent.

The government is opposed to further monetary tightening because it could hurt economic growth, but central bank officials have repeatedly stressed that their priority is controlling inflation rather than promoting growth.

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