Thailand’s central bank governor said policymakers are prepared to act if economic growth worsens, though they would avoid taking interest rates below zero.
“In the short term, we are ready to use monetary policy if needed,” Bank of Thailand Governor Veerathai Santiprabhob told reporters on Saturday during a visit to Laos. “We are ready to act if growth fails to meet our expectations.”
He cautioned against taking the benchmark interest rate below zero, saying that “the key rate shouldn’t be negative, as it will create lots of structural problems.”
The Bank of Thailand cut borrowing costs earlier this month to 1.25 percent — the second reduction in three months — and eased rules on capital outflows to blunt the local currency’s appreciation.
The baht is Asia’s best-performing currency after gaining more than 9 percent against the US dollar over the past year.
The recent surge could be pushing the currency beyond what fundamentals dictate, and the exchange rate is likely to become more volatile, the governor said.
Currency strength and the US-China trade dispute have pressured Thailand’s economy, which the Thai Office of the National Economic and Social Development Council said would expand 2.6 percent this year, the slowest pace since 2014.
Veerathai said the central bank is concerned about baht strength and is monitoring the situation closely as the year-end approaches, because it is a period that tends to have a high volume of foreign-exchange transactions.
He said he has asked banks to watch out for irregular transactions, and to comply strictly with foreign-exchange rules.
Inflation of 0.11 percent last month was the lowest since June 2017, well below the central bank’s 1 percent — 4 percent annual target.
Veerathai said inflation is not a big problem for Thailand at present, but financial stability risk has become a policy challenge.
The central bank is considering ways to boost the policy-transmission process through new players or to financial markets directly, bank Deputy Governor Mathee Supapongse said, without elaborating.
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