Meeting eases BOT pressure

Kittiratt

Prasarn

Kittiratt appears to back off call for rate cut, as Prasarn welcomes 'creative' input

Intense pressure on the Monetary Policy Committee to counter the strong baht looked to have eased after the momentous meeting yesterday between the Bank of Thailand, Finance Minister Kittiratt Na-Ranong and the private sector.

Bank of Thailand Governor Prasarn Trairatvorakul said all sides pledged to listen more to the other stakeholders. The central bank would host the next tripartite meeting, he said.

The meeting took place as the baht retreated to near the 30 mark against the US dollar for the first time in four months.

Kittiratt said an interest-rate cut was just "one of a hundred" measures that could be used to deal with the strong currency.

He appeared to be backing off his strong insistence for the central bank to lower its policy interest rate to reduce the baht's appeal.

Kittiratt, who is also a deputy prime minister, described the meeting with central bankers and executives as "having a good atmosphere and beneficial".

Prasarn said he felt no pressure during the meeting, which he described as "creative". "The meeting did not discuss measures to take care of the baht or the policy interest rate. Most of the discussion involved the challenges, both long term and short term, for the Thai economy," he said.

The government and the private sector did not push the Bank of Thailand for a rate cut at the MPC meeting on May 29, he said.

After the meeting in the morning, Prasarn said the overall economic situation was at the centre of the discussion, not specific measures to tackle the baht's appreciation or the policy rate.

The short- and long-term economic outlook was discussed, while the private sector ticked off their troubles ranging from labour shortages and productivity plateaux to competitiveness erosion, he said. It was agreed that all parties are confronting big challenges amid global volatility.

Six of the seven members of the MPC, which is chaired by the central bank governor, attended the meeting at Government House. It lasted a little over two hours. Thong-urai Limpiti, a panel member, was absent due to a busy schedule overseas.

Representatives from the private sector, including the Federation of Thai Industries, Thai Chamber of Commerce and the National Economic and Social Development Board, the government's think-tank, also attended the rare meeting.

The baht climbed 0.3 per cent to 29.69 per dollar as of 3pm in Bangkok after slipping 1.4 per cent in the two days to Friday, according to data from Bloomberg. Earlier, it touched a two-month low of 29.85.

Kittiratt, who initiated the meeting, expected to neutralise the mounting feud between his ministry and the central bank over exchange-rate policy.

The MPC had been pressured to reduce the policy rate to slow down capital inflows that have boosted the baht against the greenback. The Bank of Thailand last week issued a statement explaining why the policy rate could not be cut. One of the reasons is the low real rate, the policy rate minus inflation (see graphic). Thailand's real policy rate as of May 9 stood below 0.5 per cent, making it the second lowest in Asia after Indonesia's.

Prior to the MPC's next regular meeting, the NESDB will release its report on the first-half economic indicators.

Prasarn noted that Kittiratt suggested holding similar meetings in the future and said the BOT would host the next one. He agreed many issues require views from the public to ensure measures are integrated.

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Article source: http://www.thethailandlinks.com/2013/05/14/meeting-eases-bot-pressure/