You are here

Falling prices won't change monetary policy yet: Thai central bank

27346310.2 (30223466) - 13_12_2013 - khaz16.jpg
Thailand's central bank said on Tuesday it was not considering adjusting monetary policy despite the first decline in consumer prices in more than five years, suggesting it may not cut interest rates next month as some analysts expect.

[BANGKOK] Thailand's central bank said on Tuesday it was not considering adjusting monetary policy despite the first decline in consumer prices in more than five years, suggesting it may not cut interest rates next month as some analysts expect.

The Bank of Thailand sees price declines as a short-term phenomenon, likely lasting only into the second quarter, and does not expect the country to fall into deflation, Assistant Governor Mathee Supapongse told reporters.

The monetary policy committee "sees negative inflation as temporary. Monetary policy does not give priority to supply shocks, so the MPC has yet to think about adjusting monetary policy," he said.

The country's headline consumer price index slipped in January for the first time since September 2009, falling 0.41 per cent year-on-year, mainly driven by falling oil prices.

sentifi.com

Market voices on:

But the core rate, which strips out energy and food prices, was little changed at 1.64 per cent in January.

With consumer prices falling and economic growth stubbornly sluggish, some analysts expect the central bank to cut its policy rate, which has stayed at 2.0 per cent since last March, when it next reviews policy on March 11.

The military junta that took power in May to end prolonged political unrest has struggled to get Southeast Asia's second-largest economy back on track as exports are weak and domestic demand remains soft.

Deflation has led to monetary easing elsewhere in the world, but Thailand's central bank held its interest rate steady at a policy meeting last week.

Mathee said the BOT focused on inflation over the next one to two years, rather than current levels because it would take 6-12 months for a policy change to have an effect.

The central bank this year switched to targetting headline inflation in a range of 1.0 to 4.0 per cent, having previously targeted the core rate.

Mathee said actual inflation this year could be lower than the central bank's forecast of 1.2 per cent.

Price declines are positive for Thailand's economic recovery, he said, adding prices were expected to increase in the second half of this year.

Chaiyarit Anuchitworawong, executive vice president of Bangkok Bank, told Reuters he did not expect an impact from decreasing prices, believing the government will come up with stimulus measures to tackle it.

Some think falling prices have done little to help. "Costs are lower but customers are more important and they are not spending much," said Benjarat Manakhantikul, a 45-year-old food shop owner in Bangkok.

REUTERS

grab

Receive $80 Grab vouchers valid for use on all Grab services except GrabHitch and GrabShuttle when you subscribe to BT All-Digital at only $0.99*/month.

Find out more at btsub.sg/promo

Powered by GET.comGetCom