What the interest rate hike will mean

[webfact]

What the interest rate hike will mean

By The Nation

 

 

Given economic advances and global uncertainty, the Bank of Thailand is poised to nudge the figure up

 

The Bank of Thailand’s Monetary Policy Committee (MPC) is drawing closer to ending its low-interest policy, which has been in place for several years. Two of the panel’s seven members signalled at its latest meeting, on Wednesday, that they were now in favour of a rate hike.

 

It is likely that the policy interest rate will go up by 0.25 per cent – to 1.75 per cent – around the end of the year if the upward momentum continues over the next couple of months.

 

While the majority of MPC members remain committed to the current 1.5-per-cent policy rate, more are expected to shift their position in view of the lesser need to keep the price of money at a record low. On the other hand, there has been greater worry that the absence of a rate hike over a prolonged period could lead to underestimated risk, especially among consumers and businesses.

 

At the macro level, the country’s economic growth remains on track, with GDP projected to increase by 4.4 per cent this year and inflation by around 1.1 to 1.2 per cent. In terms of economic progress, the country’s export sector is the leading player, accounting for over 60 per cent of GDP, so the MPC at its next meeting scheduled for November 14 will likely take a closer look at export growth, projected to be around 5 per cent.

 

Crucial factors on this front are the United States’ tendency towards protectionism and the US-China trade war and its consequences for other exporting nations, including Thailand. The strengthening baht is meanwhile another key component affecting the international competitiveness of Thai exports.

 

As for domestic consumption, recovery appears to have been solid this year, while public-sector investment is expected to be stronger next year due to the start of multiple infrastructure mega-projects. According to HSBC, the MPC is likely to commence the normalisation process in December, with the first hike of 0.25 of a percentage point possibly agreed at its final meeting of the year, on December 19.

 

For global trade, the outlook remains of concern because Thai exports could slow next year as a result of the US-China trade battle, following Washington’s levy of 10-per-cent tariffs on Chinese imports worth as much as $200 billion. The tariffs will be increased to 25 per cent later in 2019. US President Donald Trump had already also slapped tariffs on Chinese imports worth about $50 billion after Beijing retaliated by imposing the same tariffs on American imports.

 

Due to Thailand’s role in the global supply chain, the trade war involving the world’s largest and second-largest economies will have significant effect on Thai growth. There are also potential benefits, in the likely relocation of more industrial production to Thailand and other Southeast Asian countries.

 

HSBC believes headline inflation in the 1-4 per cent range supports the MPC rate-normalisation move and that slower inflation growth means more gradual rate hikes in 2019, even though oil prices are expected to rise in the next two years. The second rate hike, of another 0.25 percentage point, is in the offing for the second quarter of 2019, but any move will be data-dependent, contingent on a stronger household income and global economic growth.

 

Source: http://www.nationmultimedia.com/detail/opinion/30354930

 

-- © Copyright The Nation 2018-09-21

[neeray]

1 hour ago, webfact said:

Due to Thailand’s role in the global supply chain, the trade war involving the world’s largest and second-largest economies will have significant effect on Thai growth. There are also potential benefits, in the likely relocation of more industrial production to Thailand and other Southeast Asian countries.

 

The reading that I have done would seem to indicate that the "Trump trade war" will in the long run help Thailand more than it will hurt. That being the case, "thanks Donald".

[LazySlipper]

33 minutes ago, neeray said:

That being the case, "thanks Donald".

 

I am not sure whether I can read sarcasm or not in your post, but as far as I am concerned anything that keeps the bht strong is bad for me.

[neeray]

3 minutes ago, LazySlipper said:

 

I am not sure whether I can read sarcasm or not in your post, but as far as I am concerned anything that keeps the bht strong is bad for me.

Connect the dots by reading both sentences of my post and you will realize that I intended sarcasm. Personally, I am more concerned about the long term overall welfare of Thailand than I am about the baht's strength and how it affects you.

You are ONE. There are tens of millions of others besides you in Thailand.

Trumps tariffs will affect most of the world, some positive, some negative. If they help Thailand's economy in general, I consider that a good thing.

[LazySlipper]

1 hour ago, neeray said:

Personally, I am more concerned about the long term overall welfare of Thailand than I am about the baht's strength and how it affects you.

Bleeding heart bub!

Thais will take care of Thais b4 they give a <deleted> for you so why do you care?

[arithai12]

19 hours ago, neeray said:

The reading that I have done would seem to indicate that the "Trump trade war" will in the long run help Thailand more than it will hurt.

I read that too, and I don't understand it. The current US/Trump strategy is to make it harder for other nations to export to US more than they import from US (aka as trade balance), whether this makes global sense or not.

Ergo, if Thailand were to fill a yet undefined vacuum of Chinese products to the US, it is likely that it would be hit with more tariffs than it is now.

 

The one thing I see of direct consequence to me in this planned increase of the interest rate is that if it happens I should go to my bank, liquidate my current 800k fixed deposit for retirement extension, and negotiate a new one with a better interest.

[neeray]

2 hours ago, arithai12 said:

I read that too, and I don't understand it. The current US/Trump strategy is to make it harder for other nations to export to US more than they import from US (aka as trade balance), whether this makes global sense or not.

Ergo, if Thailand were to fill a yet undefined vacuum of Chinese products to the US, it is likely that it would be hit with more tariffs than it is now.

 

The one thing I see of direct consequence to me in this planned increase of the interest rate is that if it happens I should go to my bank, liquidate my current 800k fixed deposit for retirement extension, and negotiate a new one with a better interest.

In simple terms, if manufacturers set up in Thailand as an alternative, that creates jobs and growth for Thailand. By the time that happens, Trump will be long gone, maybe even wearing an orange jump suit.

It remains to be seen if the next president imposes import tariffs on Thai manufactured products. I doubt it; tariffs are a negative, retaliatory tool of this president, generally not embraced by other administrations.