(Bloomberg) -- Thailand has a limited space to deliver a “strong dose” of monetary policy, central bank Governor Veerathai Santiprabhob said as he cautioned against negative interest rates.
“The key rate shouldn’t be negative as it will create lots of structural problems,” Veerathai told reporters on Saturday during a visit to Laos.
Bank of Thailand cut its key interest rate earlier this month to a record low -- its second reduction in three months -- and eased rules on capital outflows to blunt the appreciation of the local currency. The baht is the region’s best-performing currency after gaining more than 9% against the dollar in the past year.
The recent surge could be pushing the currency beyond what fundamentals dictate and it’s likely to become more volatile, the governor said.
Gains in the baht and the U.S.-China trade war have pressured Thailand’s economy, which the national economic council said will expand 2.6% this year, the slowest pace since 2014.
Inflation of 0.11% in October was the lowest since June 2017, well below the central bank’s 1%-4% annual target. Finance Minister Uttama Savanayana said earlier this month that the central bank has proposed to narrow the inflation band for next year to better manage monetary policy.
Prime Minister Prayuth Chan-Ocha’s government is considering additional stimulus measures by the end of the year, on top of a $10 billion stimulus package it passed in August. The governor was in Laos’s historic city of Luang Prabang for the central bank’s annual press trip.
To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at email@example.com
To contact the editors responsible for this story: Sunil Jagtiani at firstname.lastname@example.org, ;Shamim Adam at email@example.com, Michael S. Arnold, Clarissa Batino
©2019 Bloomberg L.P.