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March 4, 2009

Thailand: Ex-governor appointed central bank chief
The Thai government on Tuesday named former Bank of Thailand chief Chatu Mongol Sonakul as the chairman of a new central bank board that will appoint the policy committee that sets interest rates, reported Reuters.

A senior central bank official said the present policy committee was likely to see out its term, which runs until late 2011.

Chatu Mongol was governor of the central bank from 1998 to 2001, when he was sacked by former Prime Minister Thaksin Shinawatra following a rift over interest rate policy.

"Chatu Mongol has been selected for the post but he will need royal approval," deputy government spokesman Puttipong Punnakan told a news conference after the weekly cabinet meeting.

Under an amended Bank of Thailand Act, the board will now be chaired by someone from outside the central bank rather than by its governor, as in the past.

Among the 12 new board members are Governor Tarisa Watanagase and her three deputies, former assistant governor Siri Ganjarerndee, state planning agency chief Ampon Kittiampon and Finance Ministry official Kanit Sangsubhan.

Many of them are already members of central bank committees.

Assistant Governor Arkabuth Krairiksh told Reuters the incoming central bank board was not expected to appoint a new rate-setting Monetary Policy Committee (MPC) until the end of the term of the existing MPC.

"The current MPC still has the right to work for three years because it was legally appointed," he said.

That MPC was appointed by an acting central bank board after a confused period in the middle of 2008 when the appointment process got tangled up in Thailand's political crisis.

In July 2008 a previous administration, whose main focus was a slowdown in the economy and which was in dispute with the central bank over policy, nominated people seen to be pro-growth.

That led to worries the board would appoint an MPC that might be reluctant to raise interest rates to fight inflation, at its highest in a decade at that time.

But head of state King Bhumibol Adulyadej never endorsed the board's would-be chairman, so the board never formally took office. No explanation has been given for the withholding of the royal assent.

Since the saga began, inflation has evaporated -- prices in February were 0.1 percent lower than a year earlier -- and interest rates have fallen sharply. Since December, they have been slashed by 225 basis points to 1.5 percent.

The present government, in power since mid-December and led by opponents of Thaksin, is in broad agreement with the central bank on how to tackle the economic slump, by a combination of rate cuts and fiscal stimulus measures.

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