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Published on December 22, 2007

"Things that we have been doing from the beginning are still being done now," she said.

Her comment came after the adviser to the Fiscal Policy Research Institute, Olarn Chaipravat, formally claimed that the central bank had implemented a new exchange-rate policy on October 1, a managed float with a target exchange rate and with a narrow band system.

Olarn also indicated that the central bank's foreign reserves now consisted of 60 per cent US dollars, 30 per cent euros and 10 per cent yen and that as a result the baht had moved on a stable course in line with the regional currencies.

Olarn would like the central bank to clearly announce to the public the new foreign-exchange regime so that investors and exporters know exactly what is going on and can focus on their businesses.

The central bank has floated the baht since July 2, 1997, after its fixed exchange rate regime came apart following huge capital outflows and currency attacks.

Meanwhile, Tarisa said the BOT had been monitoring both inflation and economic growth during this time although its official policy target was core inflation, so the central bank had decided to keep the policy interest rate unchanged at its last meeting.

She said the central bank's priority was to keep inflation lower in the long run because that would bring about sustainable economic growth.

"Inflation is an important issue in the long term. If we cannot control it, investors will not be able to forecast their operating costs and whether they will be able to succeed with their sales," the governor said.

When the economy grows at a much slower pace it reduces inflationary pressure, so the BOT will increasingly turn its focus to economic growth, she said.

Economic growth next year will depend on how domestic demand - private consumption and investment - picks up as well as external factors such as the slowdown in the economies of the United States and other developed countries.

"Domestic demand has been recovering since the third quarter, but it depends on how strong the momentum is," Tarisa said.

Anoma Srisukkasem

 The Nation