Tarisa 'must step down'

Suchat's remark represents the government's latest onslaught against the central bank chief, who has consistently favoured economic stability and management of inflationary expectations.

On the other hand, the government, led by Finance Minister Surapong Suebwonglee and the premier's chief economic adviser Virabongsa Ramangkura, wants to adopt more growth-oriented policies to appeal to the public.

Suchat also alleged that the central bank had mismanaged monetary policy by tightening the money supply.

An economist by training, Suchat said the country's fiscal and monetary policies needed to be coherent.

"If two state agencies - the Finance Ministry, which is responsible for fiscal policy, and the BOT, which is in charge of monetary or interest-rate policy - are in disagreement, one of the two must take one step back. The government must quit or the other side must resign, or else the position of BOT governor should be an elected post and accountable to voters," he said.

Suchat asserted that the economy could grow as much as 8 per cent per annum if the central bank's policy interest rate were kept low at 2 per cent. The policy rate is 3.5 per cent, up 0.25 per cent from the last Monetary Policy Committee meeting.

In his opinion, higher oil and food prices should be corrected by increases in purchasing power, which should be done by slashing interest rates. By lowering interest rates, the economy would be boosted without spurring price rises, he said.

However, Abhisit Vejjajiva, leader of the opposition Democrat party, warned that the government must be cautious in exercising its political power because the central bank's independence could be harmed.

He also urged both the Finance Ministry and the BOT to work together with one side being a counter-balance to the other. Abhisit also suggested that the central bank should widen its inflation target to facilitate a more flexible economic policy while avoiding an adverse impact on households and the private sector.

BOT Deputy Governor Atchana Waiquamdee shared that view, saying the central bank must be independent in using monetary tools to manage the economy.

She insisted that rising inflation needed to be tackled by increases in interest rates, which help lower demands or increasing production.