Thai central bank wary of risks, talked about rate hike timing - minutes

 

FILE PHOTO: Thailand's central bank logo is seen at the Bank of Thailand in Bangkok, Thailand April 26, 2016. REUTERS/JorgeSilva/File Photo

 

BANGKOK (Reuters) - Thailand's monetary policy committee held interest rates steady this month but discussed the timing of the first tightening in years amid concerns about the risks of keeping policy too easy for too long, minutes of the central bank meeting showed on Wednesday.

 

On Aug. 8, the committee voted 6-1 to leave the Bank of Thailand (BOT)'s one-day repurchase rate <THCBIR=ECI> at 1.50 percent, where it has been since April 2015. One member voted for a quarter-point hike.

 

The MPC will next review policy on Sept. 19, when some analysts expect the first interest rate hike since 2011.

 

The committee believed current monetary policy settings have helped support economic growth and allowed the headline inflation trends to be consistent with the inflation target, the minutes said.

 

But it acknowledged that macroprudential measures alone would not be sufficient in preventing potential risks in the financial system. Household debt in Thailand has already been running high for years.

 

"Thus, monetary policy must be conducted with caution as to not contribute to further buildup of financial vulnerabilities", the minutes said.

 

"Should economic expansion continue and inflation move more firmly within target, the need for currently extra accommodative monetary policy would start to be reduced, and that the need for a policy rate increase in order to build policy space in the future would be increasing".

 

The dissenting member who wanted a 25 basis-point increase felt financial stability risks could affect the sustainability of economic growth over the longer term.

 

"Rate hike expectations are largely driven by the BOT’s desire to normalise policy rather than any evidence of inflationary pressures," Nomura said in a note on Tuesday.

 

Thailand's economy expanded at a slower pace in the second quarter after a strong start to the year but the state planning agency kept its 2018 growth forecast at 4.2-4.7 percent and raised its projection for export gains.

 

For a graphic on Thai Policy rate, CPI, see -

 

For the full minutes:

https://www.bot.or.th/Thai/MonetaryPolicy/MonetPolicyComittee/ReportMPC/Minute_N2/MPC_Minutes_52018_sfivmr8r.pdf

 

(Reporting by Orathai Sriring; Editing by Kim Coghill)

 

-- © Copyright Reuters 2018-08-22

Meanwhile Laborer wages lag inflation and income inequality continues to increase.

An off topic post has been removed.

IF they hike the rate.. the Baht will go up, or at least it should in theory. 

1 hour ago, Srikcir said:

Meanwhile Laborer wages lag inflation and income inequality continues to increase.

Not strictly true , minimum wage has gone up to 330 per day, ie 10% increase.