Bank of Thailand cuts rate to 1.25 per cent

[snoop1130]

Bank of Thailand cuts rate to 1.25 per cent

By THE NATION

 

Titanun Mallikamas,left, secretary of the Monetary Policy Committee (MPC) and Mathee Supapongse, deputy governor of the Bank of Thailand, brief the press today (November 6) on the MPC's decision to cut policy rate by 0.25 percentage point from 1.50 per cent to 1.25 per cent, effective immediately.

 

The Bank of Thailand’s monetary policy committee voted on Wednesday (November 6) to cut its key policy rate by 25 basis points to 1.25 per cent.

 

It is the second rate cut this year after a 1.5-per-cent trim in August, which was the first cut in four years.

 

Today’s committee meeting saw five members vote for the cut and two to maintain the existing rate.

 

The International Monetary Fund had earlier said Thailand had the policy in place to cut its interest rate and the fiscal power to spend more on infrastructure even amid the global economic slowdown being worsened by the US-China trade war.

 

Committee secretary Titanun Mallikamas said members voted 5-2 to cut the policy rate by 0.25, from 1.5 to 1.25 per cent, effective immediately. Those opposed wanted the rate maintained at 1.5.

 

In their deliberations, the members expressed the belief that the Thai economy would expand at a lower rate than expected and below its potential due to a decline in exports, which have affected employment and domestic demand. 

 

Headline inflation was projected to be below the lower boundary of the inflation target. Overall financial conditions remained accommodative. Financial stability risks had already been addressed to some extent, although there remained pockets of risks that warranted monitoring. 

 

Most members felt a more accommodative monetary policy stance would contribute to economic growth and support the rise of headline inflation toward the target. 

 

The two who disagreed felt the current rate was already accommodative and another cut might not lend additional support to economic growth, whereas there would be added potential for stability risk. They also saw a need to preserve limited policy space for coping with possible increasing risks in the future.

 

Merchandise exports contracted more than expected and were projected to recover more slowly due to the slowdown of global trade volume affected by international trade tensions. 

 

Tourism is growing at a lower-than-expected rate. 

 

Private consumption is expected to slow despite fiscal stimulus measures, due to moderated household income and a sharp decline in employment, particularly in export-related manufacturing, as well as elevated household debt. 

 

Private investment is also likely to expand at a slower rate than calculated. However, the relocation of foreign production bases to Thailand and public-private partnerships on infrastructure should support investment in the period ahead, Titanun said. 

 

Public expenditure has slowed owing partly to delays in state-owned investment projects. 

 

The committee’s consensus was that the Thai economy would face higher risks in coming months, especially external risks from trade tensions, the economic outlook of China and advanced economies that could affect domestic demand, as well as geopolitical risks. 

 

Titanun said the committee would monitor the impact of fiscal stimulus measures and public expenditure, together with the progress of major infrastructure investment and its knock-on effects on private investment.

 

The annual averages of headline inflation in 2019 and 2020 were projected to be below the lower boundary of the target due to lower-than-expected energy prices in tandem with global economic slowdown. 

 

Core inflation is expected to moderate owing to subdued demand-pull inflationary pressures. 

 

The committee felt structural changes contributed to more persistent inflation than in the past. Such changes included the expansion of e-commerce, rising price competition and technological developments reducing production costs.

 

Real interest rates and government bond yields remained low. Liquidity in the financial system remained ample. 

 

These allowed financing by the private sector to continue expanding. However, loans extended to both businesses and consumers are likely to exhibit slower growth. 

 

With regard to exchange rates, members expressed concern over the baht’s appreciation against trading partners’ currencies, which might affect the economy to a larger degree amid heightened uncertainties overseas. 

 

The committee supports the relaxation of foreign-exchange regulations to encourage capital outflows and promote more balanced capital flows, which would alleviate pressure on the baht and help the private sector better manage exchange-rate risks.

 

Source: https://www.nationthailand.com/news/30378116

 

-- © Copyright The Nation Thailand 2019-11-06

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[RotBenz8888]

4 minutes ago, snoop1130 said:

members expressed concern over the baht’s appreciation

Could that actually be the biggest problem for their economy? Just maybe perhaps?

[BestB]

I thought not too long ago BOT said rare cut was not an option, but good news for the borrowers , can borrow more to get into a bigger debt

[zydeco]

12 minutes ago, snoop1130 said:

Core inflation is expected to moderate owing to subdued demand-pull inflationary pressures. 

Must be getting their inflation numbers from the same place the US Fed does. Fantasyland or Fakeovia.

[scubascuba3]

Good, weakens the exchange rate

[Maverell]

9 minutes ago, scubascuba3 said:

Good, weakens the exchange rate

I really hope you are right, but don't hold your breath.

[Scot123]

12 minutes ago, scubascuba3 said:

Good, weakens the exchange rate

Lol! Think the opposite. If a military coup increases the rate, shutting down the country for weeks increases the interest rate, international investment leaving the country, factories closing, exports crashing and now inports dropping and the baht keeps rising do you really think this will do enything more than "baht rises to all new high"? I don't have a dog in this race anymore as left. 

[DLock]

I'm no economist, but won't a lower interest rate encourage more "hot money" flowing into Thailand, one of the touted reasons the baht was so high?

 

Edit - I got it back to front. I assumed borrowing interest rate going lower. This is interest rate that you get on your money. So it should make Thailand less attractive to Investors and reduce the baht...in theory. My dumbness.

[Number 6]

8 minutes ago, Scot123 said:

Lol! Think the opposite

In theory it should weaken the currency. Of course, dozens of factors at play. This action would never be thought to strengthen.

 

Needs to go to 1%

 

Spend 25% of currency reserves on road and rail system and education with quantifiable results. N to S train line overhaul and airports.

 

Parks for Bangkok!!!

 

Waste reclamation program.

[worgeordie]

They seem to be doing everything for people in debt,

anyone with savings, they are going to be eroded by

inflation,which is higher in the real World than the 

Government says. Cash is no longer King,better

to get some debt !

regards Worgeordie

 

[Mavideol]

1 hour ago, snoop1130 said:

With regard to exchange rates, members expressed concern over the baht’s appreciation against trading partners’ currencies, which might affect the economy to a larger degree amid heightened uncertainties overseas. 

are they starting to feel the pinch and opening their eyes..... it's about time

[Youlike]

Ohh i just wanted to book a load of money on my thai bank because i don't get interest in Europe.

[Mavideol]

1 hour ago, snoop1130 said:

The International Monetary Fund had earlier said Thailand had the policy in place to cut its interest rate and the fiscal power to spend more on infrastructure

that was the easy way to start moving forward to slow baht appreciation, they didn't listen until they saw the cliff edge coming..... better late then never, let's see how they will move forward because all their expectations about tourism increase are not happening, sure there are some tourists, maybe a little more than last year but not as many as they/TAT anticipated ( Tourism is growing at a lower-than-expected rate ) the signs have been there for quite sometime but nobody was interested in the real numbers.... they better start to move fast before it gets worse

[scubascuba3]

43 minutes ago, Maverell said:

I really hope you are right, but don't hold your breath.

interest rate down 0.25%, GBP exchange rate currently up by 0.20%, it usually happens but not always, i think last time it didn't,other news must have compensated

[kevin612]

Good, I hope usd goes back 30.50.

[unamazedloso]

Banks are making it tough for tourism. My local TMB is offering a 18.68thb/1aud transfer rate but my aus bank is 19.65thb/1aud today. This is sonething i have never seen before locally and some atms used to give options to chose different rates but not at my local tmb. 

Banks are greedy crooks and will be the doom of this place.

sorry a little off topic..

[saengd]

1 hour ago, Number 6 said:

In theory it should weaken the currency. Of course, dozens of factors at play. This action would never be thought to strengthen.

 

Needs to go to 1%

 

Spend 25% of currency reserves on road and rail system and education with quantifiable results. N to S train line overhaul and airports.

 

Parks for Bangkok!!!

 

Waste reclamation program.

Foreign Currency Reserves don't belong to the government, the government cannot touch them, they are owned by the BOT. A previous Finance Minister tried to get his hands on that money and was told no, publically, by the then BOT Governor, Tarrisa Watanagase and was supported publically by the highest person in the land.

[tjo o tjim]

43 minutes ago, saengd said:

Foreign Currency Reserves don't belong to the government, the government cannot touch them, they are owned by the BOT. A previous Finance Minister tried to get his hands on that money and was told no, publically, by the then BOT Governor, Tarrisa Watanagase and was supported publically by the highest person in the land.

The government can borrow money from the BOT though, right?  It shouldn’t be anywhere close to 25% of reserves, but 5-10% invested well might help the current issues.  “Invested well” does not include a high speed train between three “Bangkok” airports— more like Hat Yai - Bangkok - Chiang Mai

[saengd]

5 hours ago, tjo o tjim said:

The government can borrow money from the BOT though, right?  It shouldn’t be anywhere close to 25% of reserves, but 5-10% invested well might help the current issues.  “Invested well” does not include a high speed train between three “Bangkok” airports— more like Hat Yai - Bangkok - Chiang Mai

In theory government could borrow from BOT but it might be expensive, BOT is obliged to invest the reserves at competitive rates. But lending rates are low currently and government can borrow money anywhere quite cheaply and then issue government bonds/debentures to help pay for the cost of that borrowing, which is exactly what they are doing at present.

[Youlike]

9 hours ago, unamazedloso said:

Banks are making it tough for tourism. My local TMB is offering a 18.68thb/1aud transfer rate but my aus bank is 19.65thb/1aud today. This is sonething i have never seen before locally and some atms used to give options to chose different rates but not at my local tmb. 

Banks are greedy crooks and will be the doom of this place.

sorry a little off topic..

Last week i wanted to open a thai bankaccount...TMB let me/us wait while the staff was not busy so we left and went next door to another bank...Got the bankaccount in 10 minutes and on the way back i waved my new papers to them.....????