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Published on March 18, 2008

The Bank of Thailand (BOT) said local policy rates will mainly address conditions in the domestic market as rising oil prices and growing inflation remain grave concerns today.

Atchana Waiquamdee, the bank's deputy governor, said widening interest rate spreads between the US and Thailand's policy rates may not lead to sharp capital inflows as in the past.

She said global liquidity and risk appetite have changed markedly in recent months because of the financial turmoil.

If the Fed fund rate is cut from 3 per cent to 2 per cent, compared with BOT's current policy rate of 3.25 per cent, it would not necessarily mean the central bank has to ease correspondingly.

The main danger Thailand faces is high inflation rather than a credit crunch, she said. Atchana added she was more worried about oil price breaking $110 a barrel, and rising further, and about shortage of commodities. She said the bank is also concerned about the slower-than-expected recovery in the local market.

The Nation