"We expect to see a cut in GDP forecast in our (inflation) report next month due to rising negative factors," Governor Prasarn Trairatvorakul said, according to a statement released by the central bank on remarks he made in Washington, D.C. on Saturday.

The Bank of Thailand has forecast 2011 economic growth of 4.1 percent, and 4.2 percent for 2012.

Deciding what to do with interest rates at Thailand's next policy meeting in October will be difficult because of the increasing risks to economic growth, a deputy central bank governor said.

Last month, Thailand's central bank raised its benchmark interest rate, the one-day repurchase rate, by 25 basis points to 3.50 percent, citing rising inflation risks posed by the government's plan to raise wages and support rice prices.

Last week, Thailand's government has asked the central bank not to raise interest rates further, adjust its inflation target and possible cut interest rates to help the economy weather the global slowdown. .

"The central bank shares the same view with the finance ministry that there are growing risks to economic growth over the coming period. We do see that there has been a progress of the normalization of the policy rate," Prasarn said on Saturday, according to the central bank statement.

"But it's still unclear what the government's view is toward adjusting inflation target at this point. I expect more clarity when we have the next discussion on this."

Headline inflation hit 4.29 percent in August and core inflation, which strips out energy and fresh food prices, rose to 2.85 percent, near the top of the central bank's target range of 0.5 to 3.0 percent, which it uses to guide monetary policy. But some economists said inflation might have peaked.

Asked if he was concerned about the debt crisis in Europe, Prasarn said: "The central bank has been closely monitoring the problems. We expect no serious impact to Thailand since most commercial banks in Europe have few transactions with Thailand and our banks have been managing risks well with trading partners."

"On the economy front, Thailand has also increasingly expanded intra-regional trade and cut our exports to G3 countries. But of course, there'll be some impact from a drop of consumption in G3 countries," Prasarn said.

Capital outflows across Asia have weakened currencies including the baht over the past week as investors’ fear the world economy is heading for a recession, but Prasarn said he has no plan to intervene.

"The central bank has no policy in intervening in the currency. Our job is not to change the direction but to lower the sharp volatility and see that the business sector has enough time to adjust."

Thailand's benchmark SET index closed down 3.27 percent to 985.16 on Friday with foreign investors selling Thai shares worth 3.15 billion baht ($102.5 million). The index dropped 7.3 percent last week, its biggest weekly decline since November 2008.