The Monetary Policy Committee found it easier to make a decision on monetary policy this time round than it did during the previous meeting on June 7, with the consensus being that the central bank should hold onto this interest-rate level amid a gloomy outlook.

The political crisis is expected to be resolved later rather sooner. Many fear that the 2006-07 budget might not be passed in time, due to delays in both the election and the formation of a new Parliament and government.

"Looking ahead, in light of many uncertainties, including oil prices, there is a risk the economy, especially in private-investment demand, may continue to slow down for some time," the central bank said in a statement.

BOT governor MR Pridiyathorn Devakula has steered the central bank towards independence. Last month, the Monetary Policy Committee resisted a call by caretaker Finance Minister Thanong Bidaya not to raise the rate for fear that higher rates could further hurt the Thai economy.

At that time, the committee faced a real dilemma. If it did not raise the rate, inflation might threaten economic stability. But if it were to raise it, to combat inflation and narrow the gap further between inflation and a negative yield of interest rates, it would dampen economic growth. Higher rates had already affected Thais' purchasing power.

But the central bank did the right thing then by paying more attention to stability. It was more concerned about rising inflation, higher oil prices and the negative real interest rates. Added to these worrying signs was the prolonged political crisis.

Standard and Poor's Ratings Services has warned that the Thai sovereign rating might be affected if the political crisis dragged on. "If the political uncertainty persists into 2007, then the damage to the investment climate could become long-lasting," it warned.

With clear signs of an economic slowdown on the horizon, it is better for the BOT to keep the rate unchanged. The Thai rate has been lagging behind the US rate, which now stands at 5.25. There is speculation the US Federal Reserve Board might raise the fed funds rate again to 5.5, in order to keep inflation at bay.

The Thai rate cannot trail the US rate much longer, because Thailand's economy is not generating enough growth opportunities to encourage investors to bring money into the Kingdom.

Between August 2004 and last month, the Monetary Policy Committee raised the rate 13 times as the Thai economy recovered from the economic crisis.

Assistant governor Atchana Waiquamdee said the bank expected the country's real interest rate - the nominal rate adjusted for inflation - currently at minus 0.4 per cent, to turn positive next month. The headline inflation rate will likely subside, although at a slower-than-expected pace, given the rising oil prices.

Inflation eased to 5.9 per cent last month, from 6.2 per cent in May. The Dubai oil-price estimate for this year is an average US$71 (Bt2,713) a barrel, up from $62 previously.

The central bank will announce revised forecasts for Thailand's economic growth this year in a report to be issued on July 28.

Is the BOT approaching an end to the cycle of tightening interest rates? This is difficult to say, for uncertainty remains on the horizon. The central bank has left its options open as to whether it will raise the rate again next time. For the time being, let's get down to the business of resolving the political crisis first.