Thai PM sacks central bank boss

The Central Bank had been keeping interest rates low to help revive Thailand's economy

By the BBC's Claire Arthurs in Bangkok.

The Thai government has sacked the governor of the Central Bank, Chatu Mongol Sonakul, following a dispute over monetary policy.

Prime Minister Thaksin Shinawatra said he was not satisfied with the bank's policy of keeping interest rates low.

Mr Sonakul pursued a policy of low interest rates

The row - which had been brewing in public for a week - is expected to have an impact both on financial markets and Thai politics.

The outgoing banker is respected internationally and his departure raises questions about the independence of the Central Bank.

He will be replaced by the president of Import-Export Bank, Pridiyathorn Devakula.

Low interest rates Thailand's central bank has been trying to revive the country's stagnant economy by keeping interest rates low.

The dispute appeared to peak when Prime Minister Thaksin discovered that Chatu Mongol Sonakul had been lobbying for his policies by e-mail, something the prime minister called managing economic policy by lobby rather than science.

The Harvard-educated Bank governor argued that higher rates would not help revive the economy and that fiscal rather than monetary policies were the answer to Thailand's problems.

Government strategy

Thailand's Prime Minister, Thaksin Shinawatra

The new government has aimed its policies at helping farmers and small businesses become more productive, and at restructuring the huge debt burden of the banking sector.

But Prime Minister Thaksin wants interest rates on deposits raised.

Government officials argue that low consumer confidence is partly responsible for low growth.

Analysts say Thailand's low interest rates are a disincentive for investors, but that the bigger problem is the outflows linked to servicing debt.