Thai central bank: interest rates not only factor for fund flows

BANGKOK: Thailand's central bank chief said on Thursday that interest rates were not the only factor affecting capital flows and stressed that the central bank's duty was to maintain economic stability.

Referring to a government call for lower interest rates to help stem capital inflows that have pushed the Thai currency to an 18-month high, Bank of Thailand Governor Prasarn Trairatvorakul said a "difference in views between the government and central bank is not unusual".

The central bank will try to find a creative solution to this difference in views, he told reporters.

The baht has risen around 2.8 percent against the dollar this year, helped by foreign inflows into Thai stocks and bonds.

Exporters have complained about its strength and Finance Minister Kittirat Na Ranong said on Feb. 5 he had sent the central bank a letter setting out his view that the monetary policy committee (MPC) should cut interest rates to discourage capital inflows..

The MPC reviews policy on Feb. 20. The consensus among economists is still for no change although speculation about a rate cut has grown since Kittirat's move.

The seven-member MPC -- three central bank officials and four outsiders -- unanimously voted to leave the policy rate unchanged at 2.75 percent for a second consecutive meeting on Jan. 9, taking the view that economic conditions had improved.

Last October it surprisingly cut the rate by a quarter of a point in a split decision, due mainly to global economic risks.