Thai central bank seen hiking key rate for first time since 2011

[webfact]

Thai central bank seen hiking key rate for first time since 2011

By Orathai Sriring

 

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 central bank is expected on Wednesday to hike its key interest rate from near-record lows for the first time in more than seven years, a Reuters poll survey showed.

 

An increase would reflect how policymakers are wary of financial risks and would give them some room to cut the benchmark later if global economic conditions deteriorate.

 

Fourteen of 17 economists polled by Reuters predicted the Bank of Thailand (BOT)'s monetary policy committee (MPC) will raise its one-day repurchase rate <THCBIR=ECI> by 25 basis points to 1.75 percent, the first increase since August 2011.

 

The other three, citing slowing growth and inflation, expected the rate to be at 1.50 percent, where it's been since April 2015 and just above the record low of 1.25 percent.

 

Eight of 11 analysts who gave a medium-term view expected the rate to be at 1.75 percent at least until mid-2019.

 

"The BOT is concerned about financial stability risks... from an extended period of low interest rates," said Charnon Boonnuch, economist of Nomura in Singapore, who forecast a hike this week and then no change throughout 2019.

 

Capital Economics said a hike on Wednesday will be a case of "one and done", due to the economy's weakening outlook.

 

Growth in Southeast Asia's second-largest economy stalled in the third quarter from the second as exports slowed and tourism has been hit by falling numbers of Chinese visitors.

 

The BOT has said it might trim its 2018 growth outlook from 4.4 percent when it reviews that on Wednesday. Last year's growth was 3.9 percent, the best in five years.

 

On Nov. 14, the MPC voted 4-3 to hold the key rate but noted a reduced need for "accommodative" policy.

 

MISSED THE BOAT?

BOT Governor Veerathai Santiprabhob said last month the policy rate would still be low, even if there is policy tightening, which will be data-dependent.

 

Wednesday's decision will be another "close call", and it would be "preferable to wait" given risks including U.S-Sino trade tensions and Brexit, said Kobsidthi Silpachai, head of Kasikornbank's capital markets research.

 

Prakash Sakpal, ING economist in Singapore, predicts no policy change now.

 

"We believe the Bank of Thailand has missed the boat. Growth has already started to slow down and inflation has dipped below 1 percent - not really the right time to change policy, he said."

 

November's annual headline inflation rate was 0.94 percent. In the previous seven months, the rate was inside the BOT's target range of 1-4 percent.

 

(GRAPHIC: Thai Policy rate, CPI,

 

(Additional reporting by Anisha Sheth in BENGALURU; Editing by Richard Borsuk)

 

-- © Copyright Reuters 2018-12-17

[worgeordie]

It would be nice to have interest rates that are higher than inflation rates (not the Govt ,but real inflation rates )

regards worgeordie

[Srikcir]

18 hours ago, webfact said:

Growth has already started to slow down and inflation has dipped below 1 percent - not really the right time to change policy

Except when inflation in 2018 is up

18 hours ago, webfact said:

In the previous seven months, the rate was inside the BOT's target range of 1-4 percent

In October the index was UP 1.23 percent.

Consumers don't pay an average annual inflation rate. They don't get money back when inflation is down in a month. It is past time for BOT to raise rates.

Frankly if BOT doesn't raise rates now, then BOT has aligned its fiscal policies with the government to protect the government's political messaging, ie., before the next election.

[RichardColeman]

Never thought in my life you could get poorer by putting money into a bank if you did not 'top it up' every year to allow for the difference between interest rates and inflation !

[hobobo]

20 hours ago, worgeordie said:

It would be nice to have interest rates that are higher than inflation rates (not the Govt ,but real inflation rates )

regards worgeordie

But it 'll also strengthen the Bhat resulting in even worse exchange rates for most currencies.

[worgeordie]

8 minutes ago, hobobo said:

But it 'll also strengthen the Bhat resulting in even worse exchange rates for most currencies.

True,and i don't want that either,it seems we are in a no win situation.

regards worgeordie

[hobobo]

1 minute ago, worgeordie said:

True,and i don't want that either,it seems we are in a no win situation.

regards worgeordie

Nobody does. It's been ages and ages since expats in Thailand were in a win-win situation. The last twenty years it's been mostly one way - downhill. But, as they used to say, "Mustn't grumble".