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CPI more useful for the business sector
PARISTA YUTHAMANOP
Deputy BoT governor Atchana Waiquamdee talks economics as deputy governor Bandid Nijathaworn looks on. |
The Bank of Thailand will switch the target of its monetary policy to headline inflation to make it more appropriate for use in the private sector, according to central bank governor Tarisa Watanagase. Since 2000, monetary policy has been set with the goal of keeping core inflation, which excludes energy and fresh food from the consumer price index, between a range of zero and 3.5% over the next eight quarters.
A switch to headline inflation would shift the target to be based on the consumer price index.
''The central bank will conduct a public hearing with the private sector on changing the target when the new monetary policy committee is established,'' Dr Tarisa said yesterday.
The central bank's new board of directors will be responsible for selecting members of the new monetary policy committee under the revised Bank of Thailand Act.
But recent government appointments to the central bank board have stirred controversy as a number of nominees currently face legal suits.
Piyasvasti Amranand, a former energy minister, said during the central bank's annual symposium yesterday that the qualifications of members of the board of directors are important for the bank's credibility.
''We should not waste time in interpreting the law. We should look at the spirit of the law, which requires credible persons,'' he said, referring to a complaint lodged by the opposition party to the ombudsman accusing some directors of having conflicts of interest with their executive positions in commercial banks.
''The previous government tried to establish a benchmark, with many ministers resigning when a court decided to hear a legal suit in which they were defendants. But this government relies on court interpretation,'' he said.
Bandid Nijathaworn, a deputy central bank governor, said that the double-digit pace of production price increases in August reflects mounting inflationary pressure.
The Producer Price Index, which measures price of goods at the factory gate, rose 22% year-on-year in August.
''Although the consumer price index decelerated, the double-digit PPI in August showed that the underlying pressure of the inflation will take time to ease,'' Dr Bandid said.
His comments echoed earlier comments by central bank senior officials that inflation remains the focus of monetary policy.
Dr Bandid added that as the real interest rate, the nominal deposit rate minus inflation, stood in negative territory, this suggested that monetary policy was accommodating economic growth.
He said he believed economic growth rates of 6% in the first quarter and 5.4% in the second were satisfactory.
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