The interconnectedness between these three laws recognizes the importance for central bank in optimizing the synergy in responsibilities for safeguarding concurrently monetary and financial stability. The new BOT Act empowers the central bank to ensure monetary and financial system stability and enhances its operational efficiency and effectiveness of monetary operations. This is achieved by strengthening the transparency and accountability of the BOT’s monetary policy process. Under the new Act, the Monetary Policy Committee will be charged with legal responsibility in the realm of both monetary policy target and exchange rate management policy. The Act will also increase the Bank’s operational independence by making it more difficult to dismiss the Bank’s governor, requiring a cabinet decision with a clear underlying reason. Meanwhile, the Financial Institutions Business Act (FIBA) governs the framework and conduct of financial institution supervision, designed to capture the international best practices of financial institution supervision according to Basel Core Principles (BCP). Specifically, this law allows the central bank to implement consolidated supervision of financial conglomerates, as their business models evolve, together with prompt corrective actions, macro-prudential measures, and measures to improve consumer protection from unfair practices by some financial institutions and non-banks. Finally, the Deposit Protection Agency Act will replace the current blanket deposit guarantee in place since 1997. The new system of limited-coverage deposit insurance will be phased in over four years to allow banks and depositors to adjust to the new framework.

So far, we have observed the cost-push pressure in the recent acceleration of domestic headline inflation, which rose from 2.3 percent at end-2007 to 5.3 percent at end-March, averaging 5.0 percent during the first quarter of this year. During this same period, core inflation averaged 1.5 percent. The central bank is keeping close monitoring of the inflation trend. The aim is to prevent higher inflation from dampening the anticipated recovery of consumption as purchasing power declines. And, rising costs would also reduce business profit margins and delay private investment. Nevertheless, though this downside risk is substantial, higher commodity prices will accelerate farm income, which tends to augment consumer purchasing power and income of agricultural exporters. As for the volatility emanating from international financial markets, my view is that the global financial environment may become more volatile for the rest of this year. However, now that the US dollar has lost sufficient ground, no one knows for sure which way a currency will move. But, with increasing likelihood, we should expect to see more 2-way movements in regional currencies. On the impact of the sub-prime woes on the Thai financial system stability, I can assure you that the direct impact of the sub-prime crisis on the Thai economy is minimal. As you may already know, only four Thai banks have CDO investment exposures, accounting for merely 0.3 percent of the banking system’s total assets. Of the four banks, the one that was more affected than the rest has already recapitalized.