Policy interest rate likely to rise before year-end

BANGKOK, June 11 (TNA) – Bank of Thailand (BoT) Governor Tarisa Watanagase on Thursday said the policy interest rate is likely to increase before the end of this year if the economy continues growing satisfactorily.

She said whether the Monetary Policy Committee raises the policy interest rate at its next meeting on July 14 depended mainly on the global economic situation and local political developments which impact consumer and investor confidence.

“The overall picture of the Thai economy remains not different from we had projected earlier. The economy may slow down to a certain extent due to the local political unrest while inflation is expected to edge up. Given these factors, we may need to adjust the monetary policy from the outset. At least, we may raise the interest rate once by the end of this year if the economy remains stable,” she said.

Mrs Tarisa said he saw no problem if commercial banks remained reluctant to raise interest rates once the central bank increased the policy interest rate.

The implementation of the monetary policy by the central bank was aimed to give a signal. It had no intention to reduce financial costs. With the signal for the interest hike, people in the business sector would be able to make the borrowing and business plans sooner, she said.

The BoT chief said she believed impacts of the global economic development, particularly the European debt crisis, would not have an adverse impact on the Thai economy.

The crisis would not have a direct impact on the Thai exports because the shipment of Thai products to Europe represents only 12 per cent of the total exports.

She said the central bank began to see foreign capital flow back into the stock market in June following continued capital outflow in May. Mrs Tarisa predicts that investment in Thailand will slow down in the second and third quarters of this year, but will turn around and increase in the fourth quarter due to an increase in production capacity to accommodate rising exports.

She said the baht had not weakened rapidly but actually had strengthened by some 2.4 per cent since early this year and remained stable if compared with other currencies in the region.

It is premature to predict whether the baht would appreciate in the long term, she said, but it is expected the baht willl strengthen against the euro because Thailand continues to earn handsome incomes from exports. (TNA)