imageBANGKOK: Thailand's central bank said on Friday it had room to cut interest rates further if necessary, on top of a reduction this week that was aimed at supporting an economy hurt by a slump in confidence after months of political unrest.

"Monetary policy will have to remain accommodative. We've long accepted that monetary policy is needed to help the domestic economy," Bank of Thailand spokeswoman Roong Mallikamas told reporters at a weekly briefing.

"At the moment, there is still room for interest rates (to be cut)," she said.

On Wednesday, the central bank's monetary policy committee cut its policy rate by 25 basis points to 2.0 percent in a close 4-3 vote. The committee said "prolonged political uncertainties would continue to impede recovery of private consumption and investment".

A general election on Feb. 2 was disrupted by protesters and Thailand is being run by a caretaker government that has limited powers to borrow and spend, putting more pressure on the central bank to help the economy.

Roong said that although inflation rates had started to rise because of higher food prices, that was not yet a matter for concern. Demand-pull pressure remained subdued due to the slowing economy.

Government controls and subsidies have helped hold down consumer prices.

Annual inflation in February ticked up to 1.96 percent from 1.93 percent in January while core inflation, which excludes fresh food and energy prices, rose to 1.22 percent from 1.04 percent.

The central bank aims to keep core inflation in a range of 0.5-3.0 percent and sets monetary policy to achieve that. Violence and months of anti-government protests have hurt consumption and investment, pushed consumer confidence to a 12-year low in February and scared away tourists from Bangkok.

On top of that, a court ruled this week that off-budget funding the government had planned for 2 trillion baht ($62 billion) of infrastructure projects was unconstitutional, effectively shelving work that had been expected to boost GDP.

Su Siam Lim, an economist with HSBC, said in a report that she expected one more 25-basis-point cut by June.

"Downside risks to growth from the political uncertainty have proven larger than expected, while the low inflation environment provides scope for further easing," she said.


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