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Bank of Thailand 'ready to act' if GDP growth disappoints

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The Bank of Thailand is prepared to use monetary policy if economic growth disappoints, its governor Veerathai Santiprabhob said.

Bangkok

THE Bank of Thailand is prepared to use monetary policy if economic growth disappoints, its governor Veerathai Santiprabhob said.

"In the short term, we are ready to use monetary policy if needed," Mr Veerathai said on Saturday during a visit to Laos. "We are ready to act if growth fails to meet our expectations."

At the same time, he cautioned against taking the benchmark interest rate below zero, saying "the key rate shouldn't be negative, as it will create lots of structural problems".

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The Bank of Thailand cut borrowing costs earlier this month to 1.25 per cent - the second reduction in three months - and eased rules on capital outflows to blunt the local currency's appreciation. The baht is Asia's best-performing currency after gaining more than 9 per cent against the US dollar over the past year.

The recent surge could be pushing the currency beyond what fundamentals dictate, and the exchange rate is likely to become more volatile, the governor said.

Currency strength and the US-China trade war have pressured Thai-land's economy, which the national economic council said will expand 2.6 per cent this year, the slowest pace since 2014.

Mr Veerathai said the central bank is concerned about baht strength and is monitoring the situation closely as the end of the year approaches, because it is a period that tends to have a high volume of foreign exchange transactions. He said he has asked banks to watch out for irregular transactions, and to comply strictly with foreign exchange rules.

Inflation of 0.11 per cent in October was the lowest since June 2017, well below the central bank's 1-4 per cent annual target. Finance Minister Uttama Savanayana said earlier this month that the central bank has proposed to narrow the inflation band for next year to better manage monetary policy.

Mr Veerathai said inflation is not a big problem for Thailand at present but financial stability risk has become a challenge for monetary policy.

Because of the limited policy space available, the Bank of Thailand is considering ways to boost the policy transmission process through new players or to financial markets directly, deputy governor Mathee Supapongse said, without elaborating.

Prime Minister Prayut Chan-o-cha's government is considering additional stimulus measures by the end of the year, on top of a US$10 billion stimulus package it passed in August. BLOOMBERG