Bank of Thailand cuts key interest rate

BANGKOK: -- The Bank of Thailand on Wednesday cut its key interest rate for the second time this year in hopes of softening a potential economic slowdown.

The central bank's Monetary Policy Committee agreed to cut the rate by a quarter point, bringing it down to 4.50 per cent, BOT assistant governor Suchada Kirakul said.

The committee had also reduced the rate by a quarter-point during its January meeting, bringing it off an eight-year high of 5.0 per cent. That rate had been in place since July 2006.

The latest cut was in line with market expectations that the bank would act to help spur the economy.

-- AFP 2007-02-28

The Bank of Thailand on Wednesday cut its key interest rate for the second time this year in hopes of softening a potential economic slowdown.

From my limited understanding, isn't that a clear signal for increased lending, and therefore the exact opposite what "sufficiency economy" aims at?

From my limited understanding, isn't that a clear signal for increased lending, and therefore the exact opposite what "sufficiency economy" aims at?

Indeed. It's the old and classic "pumping scheme". Ponzzi. Or Bozo if you prefer...

Cheap loans, to inject liquidity into the system, like a good shoot of gasoline/drug into the engine. Mai pen rai if people get more indebted... The engine must run.

Even if the "sufficiency economy" remains a kind of "flying economical object"... we can assume that the last move from BOT is... totally against it.

Probably more a case of trying to soften the baht a bit. It must be killing exports being this high.

Probably more a case of trying to soften the baht a bit. It must be killing exports being this high.

I don't agree.

BOT presented its move against "a slowdown in domestic demand, particularly in private consumption and investment".

http://www.bot.or.th/bothomepage/General/P.../Eng/n1050e.htm

They didn't talk about the THB.

Furthermore, THB didn't appreciate versus dollar and other currencies because of a differential of interest rates (it's more the case for EUR/USD).

Actually, since BOT cut, on 28 february, well the THB stay high.

Thai, Japanese, Chinese, or American... they all follow the same policy : cheap currency, cheap interest rates to create a pathetic boost like a drug addict with his heroin shots : it feels good. But it creates problems on the long run...

Anyway.

At least the other countries don't bother people with "sufficiency economy", be a theory, a concept or a philosophy...

Probably more a case of trying to soften the baht a bit. It must be killing exports being this high.

The strong Baht is indeed hurting the expot sector, just this morning on Bloomberg financial news there was a headline about the weakening Thai economy due to a slowdown in exports. The problem can't be fixed by a 25 basis point drop in the rates however. The Baht will not float back down to real valuation until the foriegn hedge funds that are invested in the thai stock market decide to sell off and convert their baht investments back to US dollars, Euros, Pounds and Aussie dollars. The precipitous runup in the TB has severly hurt Thai expoters, and with a slowdown in the US, Japanese and European economies predicted for this year the pain for those Thai companies will only continue to increse until the TB can come back down to a more normal valuation vs. those currencies.

"The problem can't be fixed by a 25 basis point drop in the rates however"

*****

right you are as today's picture shows:

"The problem can't be fixed by a 25 basis point drop in the rates however"

*****

right you are as today's picture shows:

Korn (Demo's) has called for a further 200 bps drop in rates and if need be, to near zero. Given inflation now in control, and Pridiyathorn's resignation, I think we will see larger cuts in rates in the near future. Hope this helps.