NO CHANGE TO POLICY RATE, GIVEN INFLATION STAYS WITHIN RANGE

       The core inflation rate was expected to stay within target, so monetary policy did not need to be changed unless there were some persistent factors pushing prices out of range, the Bank of Thailand said yesterday. "We will consider whether there is any additional pressure or not. If there is nothing to keep inflation out of the target range, an interest rate adjustment would bring about unnecessary volatility," said Paiboon Kittisrikangwan, an assistant governor.
       Core inflation would be about 1.4 per cent for the entire year and 1.75 per cent next year when the government's five measures to lower the cost of living expire.
       Current economic figures indicate that price stability and economic adjustments have been satisfactory, so the central bank did not need to touch the policy interest rate, he said.
       If there was any pressure to make core inflation stray out of the target band, it was the Monetary Policy Committee's duty to address the issue, he said.
       Finance Minister Korn Chatikavanij said he did not want to shepherd the central bank into cutting the policy interest rate after it officially changed its inflation target from 03.5 per cent to 0.53 per cent.
       The central bank, however, should steer its monetary policy to support the target.
       "The inflation target is proposed by the central bank so the MPC has to pursue monetary policy in accordance with its target," Korn said.
       The central bank forecasts that core inflation would be at the low end of 0.5 per cent in the third quarter if the calculation excluded the government's measures. It was 3.1 per cent and 1.7 per cent in the first and second quarters, respectively.
       Core inflation was a negative 0.2 per cent in August after prices dropped 1.2 per cent in July. Stripping out the government's measures for cashstrapped consumers introduced in February last year, core inflation was 0.5 per cent and 0.9 per cent in August and July.
       Paiboon said monetary policy would be effected based on economic conditions over the next eight quarters and the trend of persistent factors. The government's five costofliving measures were not a persistent factor.
       Kobsak Pootrakool, a central bank division executive, said core inflation would be 0.3 per cent in the fourth quarter, out of the low range of the target, due to the highbase effect as well as weak demand.
       "It's not necessary that core inflation must be 100 per cent in target. The point is that it must be back to midtarget in a proper period," he said.
       The central bank, however, had made aggressive moves since the end of last year by cutting the key interest rate. This would help guide inflation back on track.
       The central bank would refrain from making frequent adjustments to its inflation targeting policy in order to restore market confidence in price stability, which would contribute to economic sustainability in the long run.
       "There is no tradeoff between inflation and economic growth in the medium term," he said.