as a result of the divergence in economic growth between the advanced economies and emerging asia. while the growth outlook for asia is positive, there are still significant risks to the recovery in the us, the euro area, and japan, including unemployment, high public debt, and the housing slump. in these countries, policies continue to focus on shoring up their recovery and strengthening their own momentum of growth, with monetary policy remaining loose. this is in stark contrast to asia ’ s emerging markets, where the threat of inflation is real and present in the near term. inflation is expected to rise, given rising costs and rising demand, allowing producers to pass on cost increases to consumers. in addition, rising demand from emerging markets can potentially further push up commodity prices and inflation expectations. therefore, anchoring inflation expectations and ensuring long - term price stability is the policy priority in emerging asia, and in thailand. the policy divergence between advanced and emerging economies will make it difficult for both sides to arrive at any policy coordination which could lead to a win - win situation at a global level. countries will likely pursue their self - interests in conducting policy, despite the externalities such policies may bring about. while it is unlikely that we will achieve a solution that would satisfy everyone, i would like to stress that we should aim to prevent ourselves from ending up in a lose - lose situation for all, such as a return to protectionism. ladies and gentlemen, as asia is on the rise, another source of risk is that complacency can easily set in, both in the private sector ’ s risk taking behavior and in the way policy is conducted. you may recall that almost 15 years ago, thailand was also part of the “ asian miracle ” and was on track to becoming the 5th “ asian tiger ”, before unsustainable behavior led to the asian economic and financial crisis. in order to prevent the mistakes of the past and guarantee that future growth in asia is sustainable, both the private and public sectors must not be complacent. to ensure these costly mistakes are not repeated, policies must be firmly grounded on safeguarding macroeconomic stability. bis central bankers ’ speeches this leads me to my final point, which is, how the bank of thailand plans to deal with these potential risks on both the external and internal fronts. for external risks, recognizing that sizeable capital inflows could be out of line with real developments, and that spillovers can persist in the near future, we need to

tarisa watanagase : inflation targeting – a reflection on thailand ’ s experience opening remarks by dr tarisa watanagase, governor of the bank of thailand, at the bank of thailand ’ s international symposium on “ challenges to inflation targeting in emerging market countries, ” bangkok, 13 november 2006. * * * honorable guests, distinguished participants, ladies and gentlemen, first, i would like to extend a very warm welcome to all of you here today. this is the second time that the bank of thailand organizes a symposium at an international level. our first international symposium, “ practical experiences on inflation targeting, ” was held in october 2000, a few months after we had adopted inflation targeting as a new monetary policy framework for thailand. but this symposium today is the first one that brings together central bank governors, senior central bank executives, world - renowned academics and policy experts from leading international organizations. many of you have extremely tight schedules and some have to travel a very long distance. i would like to express our great appreciation for your presence and very much hope that what we will learn together in this symposium is beneficial to all of us. ladies and gentlemen, thailand formally adopted inflation targeting as a monetary policy framework on may 23, 2000. the change in policy regime was a result of our search for an appropriate nominal anchor after the floating of the thai baht in july 1997. in the interim period, we used monetary aggregates as our policy target. it was during that time that we came to recognize that the relationship among monetary aggregates, inflation, and output in thailand did not have sufficient stability and predictability to make monetary aggregates a good nominal anchor of our monetary policy. inflation targeting then appeared as a natural choice for our new monetary policy regime. from that day onward, price stability has become the bank of thailand ’ s overriding policy objective. the core inflation rate was, as it is now, to be kept within a 0 - 3. 5 percent range. when thailand adopted an inflation target some six years ago, the policy regime was a relatively uncharted territory for emerging market economies. although the history of inflation targeting dates back to 1990 with the adoption of an inflation target by the reserve bank of new zealand, prior to 1998, inflation targeting was pursued mostly by developed economies. the first substantial crosscountry study of inflation targeting, published by ben bernanke, thomas laubach, frederick mishkin and adam posen, who is here today, in 1999,