In covering FIDF losses from reserves, he argues, the BOT will be required to issue bonds to keep money supply steady as it converts baht reserves into dollars. Because bonds pay interest, the central bank will have to finance the losses, adding to the pressure to ease monetary prudence. That would stoke the flames of inflation, putting depreciatory pressure on the baht, which has held steady at 37-38 to the U.S. dollar since March 1998. Those inflationary pressures are already mounting. The BOT estimates that another 1.1 trillion baht of losses are in the pipeline from the FIDF alone.
International experience dictates against mixing politics and monetary policy.
Whether or not international currency traders agree is a wildcard. The first clangs, it seems, have sounded. Review Publishing Company Limited, Hong Kong. All rights reserved. Search Tips Prev.