Central bank's governor insists on importance of independence

File photo: Sethaput Suthiwartnarueput//AFP

Bank of Thailand (BOT) Governor Sethaput Suthiwartnarueput insists the central bank must be independent in the performance of its duties, to maintain its credibility and monetary stability, even though, in so doing, it may conflict with the economic cycle and may have widespread impacts both positive and negative.

The governor referred to research by the International Monetary Fund (IMF) last year which shows that countries with independent and credible central banks are more capable of maintaining inflation at manageable levels, he said.

In the past, the central bank has had several policies to maintain long-term economic stability, by keeping interest rates in line with the prevailing economic trends and inflation rate.

He was apparently responding to Commerce Minister Pichai Naripthaphan’s recent call for the BOT to cut interest rates and to try to keep the baht from strengthening to the extent that it hurts Thai exports,

The governor admitted, however, that there is a cost, explaining that the central bank must maintain a balance between the short- and long-term consequences of its actions.

All central banks, he said, share similar a mission, to attain sustainable growth, which requires price and monetary stability as the foundations.

He also said that cutting interest rates may help stimulate the economy in the short term but, in the longer term, it can lead to the creation of more debt, over-spending by consumers and increased inflation.

A decision made for short-term benefit, without taking into account its long-term impacts, will only lead to additional costs for the country, said Sethaput, adding that solving an acute or chronic problem cannot be achieved by one person or one organisation.

He however requires the cooperation of all stakeholders, both the private and public sectors, as well as civil society.