Thai Finance Minister sends central bank letter asking for rate cut

BANGKOK: Thai Finance Minister Kittirat Na Ranong said on Tuesday he had sent the central bank chairman a letter setting out his view that interest rates should be cut, in part to deter inflows that have pushed the baht to an 18-month high.

"Even though our economy is good, there are large speculative inflows that the Bank of Thailand should consider," Kittirat told reporters.

The letter was sent to Virabongsa Ramangkura, chairman of the Bank of Thailand board, as a formality. Virabongsa is not a member of the rate-setting monetary policy committee, although the board appoints committee members.

The committee cut the policy rate by a quarter of a point to 2.75 percent in October last year and then left it that level at the two subsequent meetings. It next meets on Feb. 20.

The Bank of Thailand runs monetary policy independently, setting interest rates to keep core inflation in a target range - currently 0.5 to 3.0 percent - that has to be agreed with the government.

Ampon Kittiampon, a member of the policy committee and chairman of state-run Thai Airways International Pcl, told reporters the minister's letter would not put pressure on the committee.

"A letter from the Finance Ministry will have no effect on our final decision. We want to reassure you that the decision made on Feb. 20 will be based on maintaining the stability of the economy," he said.

Kittirat has said repeatedly that he thought interest rates were too high as the economy struggled with devastating floods in late 2011 and then the global economic slowdown.

Recently, Bank of Thailand Governor Prasarn Trairatvorakul has responded that unemployment is low, investment is high and household credit has been climbing, suggesting it was not appropriate to loosen policy further.

Central bank officials have also pointed out that currency flows are not determined solely by interest rate differentials.

In late trade on Tuesday, the baht was quoted at 29.70 per dollar, a rise of just over 3 percent this year.