Central bank says rates appropriate

       The Bank of Thailand will not raise interest rates until it is sure the economic recovery is sustainable, according to deputy governor Atchana Waiquamdee, who played down the chance of further rate cuts following improved data.
       Interest rates in Thailand were already low and further cuts might not benefit the country much, she said.
       "The rate at 1.25% is appropriate....If we cut it by another 25 or 50 basis points, will it help spending? I think not,at a time when the economy is bad,"she said in an interview.
       Dr Atchana said there was still room for rate cuts, but only if the economy deteriorated, and she said she saw little chance of the global economy slipping again.
       "We have to reserve some bullets for the unforeseen," Dr Atchana said.
       The central bank's Monetary Policy Committee (MPC) kept its policy rate unchanged at a record 1.25% for the third meeting last week, after four cuts of a total 2.50 percentage points from December to April to help pull the economy out of its worst recession in 11 years.
       Dr Atchana said a rate rise was not likely until the economic recovery was sustainable.
       "Recovery should mean a clear momentum of sustained quarterly growth for at least two consecutive, or two or three, quarters. There should also be annual GDP growth at the same time,"she said.
       "When we want to change our stance,we need to be sure that the Thai economy has recovered and demand-pull inflationary pressure poses a risk.
       "For policymakers, they should first ascertain that the recovery is strong and sustainable at least for a period of time.Slight improvements in data should not be hastily interpreted as showing the economy is out of the woods."
       The economy grew 2.3% in the second quarter from the first, so the recession is over, but the state planning agency said political risks and weak global demand could impede the recovery.
       Dr Atchana said the annual economic contraction was likely to moderate in the third quarter and GDP should grow slightly in the final quarter of 2009 compared with a year before.
       The central bank has forecast the economy would shrink 3.0-4.5% this year,which would be the weakest performance since the 1998 Asian financial crisis, before growing 3.0-5.0% in 2010.
       Economists polled by Reuters expect the central bank to leave rates unchanged until the middle of next year, when it is likely to start raising them to tackle an increase in inflation.
       Like central banks elsewhere in Asia,the central bank has paused in its aggressive rate-cutting to assess the impact of earlier cuts amid signs that the worst of the economic downturn may be over.
       Core consumer prices, which exclude fresh food and energy were 0.2% lower in August than a year before.
       The central bank targets core inflation and has just agreed a new, slightly narrower target of 0.5 to 3.0% with the government.