Thai monetary policy to remain accommodative - central bank chief

 

FILE PHOTO: Thailand’s Central Bank Governor Veerathai Santiprabhob is seen during an interview with Reuters at the Bank of Thailand headquarters in Bangkok, Thailand March 14, 2018. REUTERS/Jorge Silva

 

BANGKOK (Reuters) - Thailand's monetary policy will remain accommodative in the medium term and any rate increases will not be continuous, the central bank said on Monday.

 

There are more financial stability risks than inflationary pressure at the moment, Bank of Thailand Governor Veerathai Santiprabhob told reporters.

 

"In the medium term, accommodative monetary policy is still needed. It's a misunderstanding that if rates increase, they will keep rising as in other countries," he said.

 

Any hikes will be "data dependent", he said, adding rates "may rise and stop."

 

The BOT's monetary policy committee wants to wait and see developments with the U.S.-China trade war, inflation and economic growth, Veerathai said.

 

Last week, the committee voted 5-2 to leave the policy rate <THCBIR=ECI> unchanged at 1.50 percent, with two members voting for a hike. Analysts viewed the vote as a hint of a rise soon.

 

The central bank is not worried about Thai and foreign interest rate differentials, as funds are still flowing into the country, Veerathai said.

The governor said central bank will ensure that the baht <THB=TH> will not be too volatile.

 

(Reporting by Kitiphong Thaichareon; Writing by Orathai Sriring; Editing by Richard Borsuk)

 

-- © Copyright Reuters 2018-09-25

They must be under a lot of pressure by the government; raising interest rates now will limit borrowing (and repaying) capabilities of the population and will result in lower (maybe even negative) economic growth. That would make it difficult for the junta as they have so little to be proud of already for their election campaign that is already underway for months.

19 minutes ago, Bob12345 said:

(and repaying) capabilities of the population

 

 

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2 hours ago, Chassa said:

 

 

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GDP growth?

3 hours ago, Bob12345 said:

limit borrowing (and repaying) capabilities of the population

There's not much investment from domestic SME's. Large Cap Thai companies are investing in their own stock and in the other ASEAN countries where GDP growth is reaching 7%.

The baht is at a five-year high value against the yen and yuan.

So long as Japan and China continue to provide massive investment and loans to the Thai government, the BOT won't be motivated with lowering rates to attract more capital.

 

14 minutes ago, Srikcir said:

There's not much investment from domestic SME's. Large Cap Thai companies are investing in their own stock and in the other ASEAN countries where GDP growth is reaching 7%.

The baht is at a five-year high value against the yen and yuan.

So long as Japan and China continue to provide massive investment and loans to the Thai government, the BOT won't be motivated with lowering rates to attract more capital.

So whats going on here: Large Thai companies are investing in other ASEAN ?

China and Japan are massively investing in Thailand ?

And why is the Baht at a 5 year high ?

16 minutes ago, Srikcir said:

BOT won't be motivated with lowering rates to attract more capital.

 

It would be higher rates that would attract capital, FDI, Bond Market etc.

Higher rates will mean the average Thai will have more trouble financing their new house or red-plated Hilux pickup. Keep rates down and credit cheap and people will feel rich and happy. Raise rates to fight inflation and over-borrowing and the junta will lose supporters (rightfully or wrongfully).