Thailand's monetary policy will focus on rising inflation even though it is not impeding economic growth, the central bank said on Tuesday, reinforcing market expectations that it will hold rates steady for now.
'At the moment, the central bank should focus on inflation through monetary policy,' Bank of Thailand (BOT) Governor Tarisa Watanagase told reporters.
The bank was confident it would keep core inflation within its target range of 0-3.5 per cent despite its expectations for higher headline inflation, she said.
The central bank sharply raised its 2008 headline inflation estimate to 4.0-5.0 per cent last week, from the 2.8-4.0 per cent it projected in January, citing higher oil and food prices.
This compared to 2.3 per cent last year.
Annual headline inflation jumped to a 20-month high of 5.4 per cent in February before easing to 5.3 per cent in March, a figure analysts are also expecting for April.
The baht rose to 31.62 to the dollar following Ms Tarisa's comments from an earlier 31.7 to the dollar, dealers said.
'The central bank has effectively stated that it has not ruled out tightening,' Forecast economist Vishnu Varathan said in a note to clients.
'Implicitly, the BOT is also signalling that the baht may be allowed to appreciate further to get a grip on the predominantly cost-push inflation that has its origins outside Thailand,' he said.
However, Ms Tarisa said higher inflation was not stifling economic growth, signalling no early change in its policy rate.
The central bank has kept the one-day repurchase rate steady at 3.25 per cent since last July after cutting it five times in 2007.
She said Thai interest rates, which are already the lowest in the region, did not have to follow the direction of US rates.
'The risk to inflation is higher than growth. Economic growth still has momentum,' Ms Tarisa said, adding that the economy showed clear signs of recovery in the third and fourth quarters.
'Economic growth is still going well, due partly to government stimulus measures, which is lucky,' Ms Tarisa said.
The central bank has also nudged its 2008 economic growth forecast to 4.8-6.0 per cent from a previous 4.5-6.0 per cent, saying a recovery in consumption and investment should offset a slowdown in export growth.
Economists surveyed by Reuters in March projected economic growth of 4.6 per cent this year after 4.8 per cent growth in 2007.
'At the moment, the central bank should focus on inflation through monetary policy,' Bank of Thailand (BOT) Governor Tarisa Watanagase told reporters.
The bank was confident it would keep core inflation within its target range of 0-3.5 per cent despite its expectations for higher headline inflation, she said.
The central bank sharply raised its 2008 headline inflation estimate to 4.0-5.0 per cent last week, from the 2.8-4.0 per cent it projected in January, citing higher oil and food prices.
This compared to 2.3 per cent last year.
Annual headline inflation jumped to a 20-month high of 5.4 per cent in February before easing to 5.3 per cent in March, a figure analysts are also expecting for April.
The baht rose to 31.62 to the dollar following Ms Tarisa's comments from an earlier 31.7 to the dollar, dealers said.
'The central bank has effectively stated that it has not ruled out tightening,' Forecast economist Vishnu Varathan said in a note to clients.
'Implicitly, the BOT is also signalling that the baht may be allowed to appreciate further to get a grip on the predominantly cost-push inflation that has its origins outside Thailand,' he said.
However, Ms Tarisa said higher inflation was not stifling economic growth, signalling no early change in its policy rate.
The central bank has kept the one-day repurchase rate steady at 3.25 per cent since last July after cutting it five times in 2007.
She said Thai interest rates, which are already the lowest in the region, did not have to follow the direction of US rates.
'The risk to inflation is higher than growth. Economic growth still has momentum,' Ms Tarisa said, adding that the economy showed clear signs of recovery in the third and fourth quarters.
'Economic growth is still going well, due partly to government stimulus measures, which is lucky,' Ms Tarisa said.
The central bank has also nudged its 2008 economic growth forecast to 4.8-6.0 per cent from a previous 4.5-6.0 per cent, saying a recovery in consumption and investment should offset a slowdown in export growth.
Economists surveyed by Reuters in March projected economic growth of 4.6 per cent this year after 4.8 per cent growth in 2007.
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