Thai Central Bank Cuts New Key Interest Rate To Spur Economy

[jumbo2]

Jan. 17 (Bloomberg) -- Thailand's central bank cut its new

benchmark interest rate to spur economic growth after confidence

was shaken by Bangkok bombings, currency controls and more

stringent foreign investment rules.

The Bank of Thailand lowered its new one-day bond purchase

rate to 4.75 percent from 4.9 percent, Assistant Suchada Kirakul

told reporters at a press briefing. The decision was expected by

10 of 15 economists surveyed by Bloomberg News. The bank had

kept its previous key rate unchanged at its past four meetings

after quadrupling borrowing costs to 5 percent since August 2004

to curb rising prices.

``The rate cut is needed to restore consumer confidence

that's been hurt by bombings and ongoing political problems,''

said Nuchjarin Panarode, an economist at Capital Nomura

Securities Pcl. ``Inflation is also under control.''

Thailand last week revised overseas ownership laws to

prevent foreigners controlling many Thai companies. Confidence

was shaken by New Year's Eve bombs that killed three people in

the capital, and after the central bank last month abandoned new

capital controls on overseas equity buyers when the rules

triggered a stock market crash.

At its first meeting this year, the central bank's monetary

policy board replaced the 14-day bond repurchase rate it has

used since May 2000, when it first adopted an inflation

targeting monetary policy. The new benchmark will allow it to

better direct borrowing costs in its bond repurchases, the bank

said on Nov. 30.

Inflation

Bank of Thailand board member Aran Thammano earlier today

told reporters the rate would be ``rounded up.'' He didn't

elaborate.

Inflation was unchanged at 3.5 percent in December as lower

fuel prices reduced transportation costs and fresh food supply

recovered after flooding damaged crops, pushing up prices in the

previous two months. Thailand imports almost all of its crude

oil, the price of which has fallen by about 30 percent in Dubai

in the past six months.

``We have low inflation,'' Bank of Thailand Governor Tarisa

Watanagase said in a Jan. 15 interview. At the last rate policy

meeting in December the committee was ``concerned'' state-fixed

prices on some products would be lifted, and ``feed into a

second round of inflation,'' she said.

Thailand's $176 billion economy may expand by as much as 5

percent this year, the same pace as 2006, the government's

economic adviser forecast on Dec. 4.

Four economists expected the key rate to be ``rounded up''

to the old benchmark's level of 5 percent, while one estimated

it would be held at the existing premium.

Confidence Slides

Thailand's consumer confidence fell for a second month in

December. Total new vehicle sales slipped 3 percent in 2006,

Toyota Motor Corp.'s Thai unit said Jan. 11.

Central bank penalties imposed last month on foreign

investments of less than a year sparked the Thai stock market's

biggest slide in 16 years, prompting the rule to be abandoned

for equity funds a day later. The controls remain for bonds,

real-estate mutual funds and foreign-currency borrowings.

The controls aimed to stem gains in the baht after the

currency surged to a nine-year high, threatening exports which

account for about three-fifths of gross domestic product.

Political turmoil had already eroded foreign direct

investment in Thailand, halving the value of new projects

approved by the Board of Investment in the 10 months to October

from a year earlier.

Sales Drop

Amata Corp., Thailand's biggest developer of land for

factories, said Nov. 22 its sales plunged 62 percent in the

first nine months of 2006 as investors delayed projects because

of political concerns.

Armed forces ousted Prime Minister Thaksin Shinawatra's

caretaker government on Sept. 19, saying it was tainted with

corruption and cronyism. Surayud Chulanont, a former army chief,

on Oct. 1 was installed as prime minister. The junta pledged to

hold elections by about October.

Until the coup, Thailand was run by a caretaker government

since February, when Thaksin dissolved parliament to call a snap

election that was later annulled by a court, leaving him unable

to pass laws.

AND THE CLASSIC RESULT IS THE THAI BAHT HAS GOT STRONGER

[samran]

AND THE CLASSIC RESULT IS THE THAI BAHT HAS GOT STRONGER

While I'm sure you are being sarcastic, the baht should have weakened upon this news of lower returns.

We live in an unpredicatble world.

[farangene]

AND THE CLASSIC RESULT IS THE THAI BAHT HAS GOT STRONGER

While I'm sure you are being sarcastic, the baht should have weakened upon this news of lower returns.

We live in an unpredicatble world.

The reason for this decrease in rates according to the Bangkok Post was to weaken the baht. I guess the next move is back to the starting line to figure out the next "ploy".

[bkkandrew]

AND THE CLASSIC RESULT IS THE THAI BAHT HAS GOT STRONGER

While I'm sure you are being sarcastic, the baht should have weakened upon this news of lower returns.

We live in an unpredicatble world.

Again, the mistake has been made by focus on the THB-USD rate. The dollar was down against everything today. Bit of a rout, average of 0.4%. Against all other cuntries, the THB fell, average of about 0.35%, as expeceted when factoring in an interest rate cut..

[bkkandrew]

Rout continues...

USD down with the following:

THB - .34% to 34.97

GBP - .36% - now $1.982 to the pound!

EUR - .6%

When will BOT realise that they are not at the centre of the Universe??