Thai Central Bank Can Ease Monetary Policy If Growth Slows

Bank of Thailand Governor Prasarn Trairatvorakul said monetary policy could be eased if the economy loses momentum, signaling he may cut interest rates next week after slower-than-estimated growth last quarter.

“Our monetary policy aim is to maintain equilibrium in the economy,” Prasarn told reporters in Bangkok today. “If we see that economic momentum slows, we can ease monetary policy to take care of that.”

The government yesterday lowered its full-year growth forecast after the economy expanded 5.3 percent in the first quarter from a year earlier, less than economists estimated. Arkhom Termpittayapaisith, secretary-general of the state planning agency, said he is “worried about the second quarter,” adding that monetary policy could address the slowdown and also help curb inflows that have boosted the baht.

“With such a soft first-quarter GDP print, well below the central bank’s own forecast, we think the BOT will likely revisit the policy rate-cut option,” said Santitarn Sathirathai, a Singapore-based economist at Credit Suisse AG. He said he expects a quarter-percentage point cut at the next meeting.

The baht rose 0.2 percent to 29.75 per dollar as of 3:14 p.m. in Bangkok. The currency last month strengthened to its highest level since July 1997, and is the best performer in Asia this year, according to data compiled by Bloomberg.

The central bank’s estimate for GDP growth last quarter was 7.1 percent, Prasarn said. While the baht may be volatile amid global uncertainties, the Bank of Thailand is ready to intervene if needed, and can impose some measures, including barring foreign investors from buying some central bank bonds, he said.

“We just want to be well prepared and stay ready,” Prasarn said. “It doesn’t mean we will do all of it.”

Financial Stability

The monetary policy committee meets on May 29, and will analyze the first-quarter data before making a decision, Prasarn said. It has held the key rate at 2.75 percent since a 25-basis-point reduction in October, citing risks to financial stability.

Thailand’s state agency yesterday lowered its full-year forecast for gross domestic product to 4.2 percent to 5.2 percent from 4.5 percent to 5.5 percent. It also cut its export growth target for the year to 7.6 percent from 11 percent.

Finance Minister Kittiratt Na-Ranong, who has led calls for lower rates, yesterday said the government has no plans to issue “abnormal measures” to stimulate the economy, even as it is concerned about the first-quarter numbers.

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