Thai central bank raises 14-day repurchase rate to 2.5%

Asian Economic News, June 11, 2001

BANGKOK, June 8 Kyodo

Bank of Thailand (BOT) decided Friday to raise its 14-day repurchase rate from 1.5% to 2.5% to correct a distortion in the short-term interest rate structure.

BOT spokesman Bandit Nijathaworn said the increase in the 14-day repo rate, effective immediately, would have little impact on the market because it was expected.

But many analysts have expressed concern over the new high interest rate policy, saying it will undermine economic recovery.

''It is a good move if the rise is to make interbank rate higher, but if it's a signal on high interest rate policy then I think it will be a negative impact. We have to wait and see if the deposit and lending rate will increase or not,'' said Citibank Vice President Anusorn Tamajai.

Earlier this week, new BOT Governor Pridiyathorn Devekula announced he will adjust overnight interbank interest rates to slow capital outflows and encourage more inflow.

The new chief was appointed last week to replace Chatumongol Sonakul after a rift over interest policy between the bank and the government.