Bankers want rate rise

Bankers urged the Monetary Policy Committee to raise its policy rate by at least 25 basis points to 3.5 per cent in a bid to arrest inflation as oil prices touched a new record of US$147.27 (Bt5,000) at the weekend before settling at about $144.

Chakib Khelil, president of the Organisation of Petroleum Exporting Countries (Opec), said oil prices would keep rising if the dollar continues to fall and if Iran, a major oil producer, is attacked.

Oil surged after the Jeru-salem Post said Israeli war planes flew exercises over Iraq, possibly preparing for a strike on Iran's nuclear facilities. Iran is the second-largest member of Opec.

The Monetary Policy Com-mittee meets on Wednesday.

Bangkok Bank senior exe-cutive vice president Deja Tulananda told Krungthep Turakij that without a rate hike, inflation could spiral out of

control and breach manageable levels.

"Personally, I favour a 50-basis-point increase. If inflation is allowed to be let loose, we will not be able to manage it [price stability]. Though higher rates may not [immediately] tame it, it can produce a catalyst to stall inflation from spreading," he said.

Prasarn Trairatvorakul, president of Kasikornbank, also noted that a 25-basis-point hike would not put a brake on new lending or pull down the economy.

Kannikar Chalitaporn, president of Siam Commercial Bank, advised the committee to base its decision on facts and take tough action without fearing a hike may slow economic growth.

Standard Chartered Bank (Thai)'s senior economist Usara Wilaipich expects the committee to raise the rate by 25 basis points and repeat that increase in August. She expects no further hikes after that.

"The Bank of Thailand is sending a signal that it will

take care of inflation," said University of the Thai Chamber of Commerce economist Thanavath Phonvichai.

Democrat Bangkok MP Atthawit Suwannapakdee suggested that the Bank of Thailand maintain its policy rate and narrow commercial banks' interest spreads.

He said the spread was now higher than in other countries and if the lending rate was maintained, while deposit rates were raised, this would not affect investment.

"Driven by oil prices, the inflation situation is unusual, with higher prices of goods and high demand. Higher rates may affect investment and boost non-performing loans," he said.

Deputy Democrat Party Leader Alongkorn Polabutr yesterday said the Cabinet should urgently discuss how to handle oil prices. A conflict in Iran could spell supply problems and may push oil beyond $300 a barrel.

Prime Minister Samak Sundaravej said on his radio show that he has asked to procure cheap diesel from Russia.

He said the diesel price would be Bt8 per litre cheaper than global prices and would be distributed to over 200 cooperatives nationwide.

The imports will reach Thailand within 60 days, starting with a 300,000-tonne shipment.

Alongkorn supported the move, but warned oil from Russia is of low quality and requires high investment in refining, so its shipment could entail high costs.