In spite of initial hesitation, members of the central bank's Monetary Policy Committee are likely to hold an unprecedented meeting today to discuss the exchange rate and monetary policy at Government House with Deputy Prime Minister and Finance Minister
“At first, some members of the Monetary Policy Committee expressed their reluctance to join the meeting. But the Finance Ministry lobbied them hard in the afternoon (last Friday). So the meeting is likely to take place,” a BOT source said.
Kittiratt has been campaigning vigorously for the Bank of Thailand and its governor, Dr Prasarn Trairatvorakul, to cut the interest rate steeply to stem capital inflows. The central bank’s stance has been that the current 2.75 per cent policy rate was able to support economic growth and hold a check on inflation.
The row on monetary policy between the Finance Ministry and the BOT has seriously undermined the credibility of national macroeconomic management. It has also raised the possibility that political pressure is being applied to remove Prasarn from office after the central banklet the baht appreciate 5-6 per cent since the beginning of this year, with the baht touching Bt28.56 on April 22.
By inviting the seven members of the MPC to meet him and representatives of the private sector, Kittiratt is sending a signal he wants to exert influence over monetary policy.
Kittiratt wants the baht to stay above Bt29 to the US dollar and the BOT to cut interest rates by at least a full percentage point to narrow the gap between the Thai rate and the US rate, now at 0.25 per cent.
The seven-member MPC, an independent body that sets interest rate policy, will break with tradition if it goes ahead with the meeting at Government House, which is now keen to influence the direction of monetary policy. But in a Thai-style compromise, the source said the Monetary Policy Committee may find it all right to meet the minister to hear his opinion directly. Dr Prasarn will certainly attend the meeting and he is understood to hold no grudge if other MPC members also attend.
Earlier, Dr Ammar Siamwalla, the noted economist, and Somprawin Munprasert, deputy dean at Chula-longkorn University’s Economics Department, supported the meeting between the Monetary Policy Committee and the Finance Ministry. They said it could lead to better understanding between the two parties.