Thailand's central bank has been trying to revive the country's stagnant economy by keeping interest rates low. The dispute appeared to peak when Prime Minister Thaksin discovered that Chatu Mongol Sonakul had been lobbying for his policies by e-mail, something the prime minister called managing economic policy by lobby rather than science. The Harvard-educated Bank governor argued that higher rates would not help revive the economy and that fiscal rather than monetary policies were the answer to Thailand's problems. The new government has aimed its policies at helping farmers and small businesses become more productive, and at restructuring the huge debt burden of the banking sector. But Prime Minister Thaksin wants interest rates on deposits raised.
Government officials argue that low consumer confidence is partly responsible for low growth.
Analysts say Thailand's low interest rates are a disincentive for investors, but that the bigger problem is the outflows linked to servicing debt.