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Published on January 11, 2008

According to an earlier law, the central bank does not need the ministry's agreement for monetary policy management. The inflation targeting policy was adopted in the wake of the 1997 financial crisis.

Chanchai Boonritchaisri, senior director of the central bank's legal and litigation department, said yesterday the MPC must set an inflation target every December as a benchmark for the government and central bank in maintaining price stability.

The target must be accepted by the finance minister, who will then secure Cabinet approval.

Chanchai dismissed concerns that politicians would meddle in the central bank's monetary management, saying both sides have hardly had conflicts over policies, just measures. They would eventually find a solution for setting the inflation target.

He cited former governor Chatumongkol Sonakul, who said that if the minister and the governor had conflicting polices, the governor should leave the post.

The central bank's draft bill was rewritten when it was reviewed by the Council of State. It originally had authorised the MPC to set the inflation target by itself and inform the minister later.

"They see that the central bank's operation has an impact on the overall economy, so they want the BOT to listen to others. The BOT's operation must take into account the government's economic policy," Chanchai said.

The bill, however, lets authorities adjust the inflation target with acceptable reasons and need. The MPC is required to report its performance to the Cabinet every six months.

Anoma Srisukkasem

 The Nation