Pattaya Daily News

12 December 2007 :: 12:12:39 pm 22887

Bot Ready To Oversee Capital Inflow If Fed Cuts Interest Rate

BANGKOK, Dec 12 – The Bank of Thailand is prepared to oversee and guide a possible capital inflow into the country if the United States Federal Reserve further reduces the policy interest rate, according to the bank‘s senior official.
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Pongpen Ruengveerayuth, senior director of BoT’s Financial Market and Reserve Management Group, said the Fed is likely to further cut the key interest rate as part of its effort to cope with the ongoing US economic slowdown.

The Federal Reserve cut its base federal funds rate by a quarter percentage point Tuesday to 4.25 percent to help the U.S. economy withstand tightened credit and a prolonged housing slump.

The mvoe disappointed Wall Street which had hoped for more-aggressive action.

She conceded the Fed’s rat+e cut would encourage an inflow of capital from the West into Thailand, but it is not the sole reason behind the continued capital inflow into the country.

Mrs. Pongpen said the strengthening of the baht to 33.63 to the US dollar on Tuesday stemmed from an unusual dumping of the greenback by exporters.

“The central bank moves to oversee the baht to ensure it will not fluctuate when the dollar is dumped. It is a normal supervision whenever the baht fluctuates or strengthen too quickly,” she said.

Asked whether the first anniversary of the adoption of the 30 per cent reserve requirement on December 19 would prompt an outflow of capital and cause the baht to fluctuate, she said a certain amount of foreign funds would flow out since it could be brought out of the country after a one-year deposit under the capital reserve rule.

She added although the reserve rule had been adopted for one year, which would allow certain foreign funds to flow out of Thailand, the BoT believed the funds would not be remitted. Foreign investment capital would be reinvested in Thailand because the Thai economic fundamentals remain strong and the political direction will be clearer after the December 23 election, she indicated.

Reporter : PDN staff   Category : Business News

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