More than once, they brought on political tension, between those in the government who believed in it and those in the opposition, or even the military, who thought otherwise. In one incident, it even caused a change in the central bank governor. Finally, we had to float our currency in 1997. Since then, we have adopted Inflation Targeting as our monetary policy framework. A core inflation target was announced at between 0 and 3.5 % per annum. The central bank will regularly monitor economic changes and make forecasts. If we see that the rate of inflation has a tendency to exceed the range, we will adopt a tighter monetary policy stance by increasing the policy interest rate, and vice versa if we see it going under the range. The policy rate that we use is the 14 day repurchase rate. BIS Review 48/2002  1  This is completely different, of course, compared to the days of fixed currency regime when interest rates in Thailand would move mostly in tandem with the US rates. The change in the monetary policy framework therefore affects the financial environment and your businesses a great deal. Development of the bond market What other change also happened? One very important change that has occurred in Thailand is the rapid development of the bond market, which took off after the 1997 crisis. The bond market is an important tool for safety and soundness of the financial institution system.
Thirachai Phuvanat naranubala: The role of non-bank financial institutions in relation to monetary policy Speech by Mr Thirachai Phuvanat naranubala, Deputy Governor of the Bank of Thailand, at the Regional Seminar on Non-Bank Financial Institutions in East Asia Region, Bangkok, 4 September 2002. *  *  *  I wish to congratulate the Securities and Exchange Commission of Thailand and The World Bank for organizing such an interesting seminar in Bangkok, and to thank them for inviting me to share my thoughts with you today. I can see that the topics in the seminar will cover many important aspects of non-bank financial institutions’ operations -- ranging from the regulatory and supervisory framework to capital market development as well as the issue of governance. But I am the only person touching on monetary policy aspect. Monetary policy does affect an important part of your business, which is the bond market. Because the one factor reflected in the bond market yield curve is inflation expectation. Therefore, if the framework and the conduct of monetary policy result in low and predictable inflation, it will help curb volatility of the yield curve and support development of the bond markets. Change in monetary policy stance also directly affect interest rate and hence the bond market. Thus, it pays for you to understand monetary policy. Monetary Policy in Thailand In order for you to do that, I have to start by telling you about how the monetary policy framework has evolved here in Thailand.