UPDATE 1-Thai c.bank has room to cut rates, worries about unrest

(Adds central bank governor's comments, job cuts)

By Boontiwa Wichakul and Trisanat Kongkhunthian

BANGKOK, Nov 25 (Reuters) - The Bank of Thailand has room to cut interest rates because inflation has fallen, but the economy might not feel the full benefit if political unrest continues to hurt confidence, central bank officials said on Tuesday.

"Inflationary pressures have eased in the second half, giving interest rates a bigger role to help the economy," Deputy Governor Bandid Nijathaworn told a seminar on Tuesday, reinforcing expectations rates would be cut next week.

Annual inflation fell sharply to 3.9 percent in October from a 10-year high of 9.2 percent in July.

The central bank is expected to cut its policy rate by at least a quarter of a point at a meeting on Dec. 3 after keeping it steady at 3.75 percent last month, following rate rises in July and August to tackle inflation.

Some analysts expect a half-point cut after economic growth in the third quarter was the lowest in three-and-a-half years, suffering from the global economic slowdown and political problems at home. [ID:nBKK376664].

Bank of Thailand Governor Tarisa Watanagase said rate cuts might not help much at a time of political turmoil.

"If there is no political stability, fiscal and monetary policies may not have much effect. Monetary policy may not boost spending as costs are only one factor and investment needs confidence," Tarisa told the seminar.

"Confidence is crucial, but it is on the downturn because of political problems," she said, as protesters surrounded the government's temporary offices in a bid to unseat it. [ID:nBKK188846].

The protracted political turmoil helped pull consumer confidence down to its lowest in a year in October.

JOB CUTS

Bandid also said monetary policy had to take into account the long-term implications.

"If rates are too low, savings will be hit. Fiscal policy may stimulate the economy better at a time of slowdown," he said.

"Actually, the current policy rate of 3.75 percent is not too high or too low," he said, in response to a comment that business wanted to see a hefty cut of one percentage point.

The central bank has said it will revise its 2009 growth forecast from 3.8-5.0 percent at the December meeting.