Interest rates likely to normalise

22 กันยายน 2557, 13:04 น.

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Interest rates likely to normalise

The Bank of Thailand has signalled monetary policy will take a back seat now that Thailand's gross domestic product growth rate is on course to meet the projected 1.5% this year.

Customers look at Honda motorcycles in a showroom in Bangkok on June 28, 2014. The days of low interest rates may be over soon as the government has other tools to stimulate the economy. (Reuters photo)

Governor Prasarn Trairatvorakul said exports, however, could fall short of 3% forecast earlier.

The steady economic recovery has made it less necessary to use monetary policy to drive growth compared to last year.

Monetary policy involves manipulating money supply by adjusting interest rates for the purpose of promoting economic growth and stability.

"With the government in place to drive budget disbursements, fiscal stimulus will take the front seat," he said.

On rising energy prices, Mr Prasarn said overall world energy prices would not get too high or to the extent monetary policy had to be revised.

The decline in international reserves, triggered by concern the US Federal Reserve would wind down quantitative easing measures and start raising interest rates, was insignificant, he said.

Bracing for the impacts from the Fed's decisions, the central bank has managed to keep the economy healthy and balanced, with few distortions.

"We think we can handle it. Our current account balance is not bad despite occasional deficits. Our inflation is also relatively good while foreign exchange rates are adequately flexible. Our banking sector is also strong.

"Unless the US surprises markets, we know to which direction we should go. We also have some buffer up our sleeve, to be used when necessary," Mr Prasarn said.