Thai central bank seen holding key rate at record low to assess risks - Reuters poll

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Thai central bank seen holding key rate at record low to assess risks - Reuters poll

By Orathai Sriring

 

FILE PHOTO: Thailand's central bank is seen at the Bank of Thailand in Bangkok, Thailand April 26, 2016. REUTERS/Jorge Silva/File Photo

 

BANGKOK (Reuters) - Thailand's central bank is widely expected to leave its key interest rate unchanged at a record low after easing policy three times this year to help mitigate the economic damage from the coronavirus pandemic, a Reuters poll showed.

 

In the poll, 17 of 20 economists predicted the Bank of Thailand (BOT)'s monetary policy committee would hold its one-day repurchase rate <THCBIR=ECI> at 0.50%.

 

The rest forecast it would cut the rate by 25 basis points to a fresh record low of 0.25%, citing a weaker economic outlook and strength in the baht <THB=TH>.

 

Most analysts think policy room is limited - after five cuts totalling 125 basis points since August - and policymakers may want to monitor the effects of previous easing and fiscal and monetary steps introduced to mitigate the outbreak impact.

 

On Friday, the BOT also announced interest rate cuts for credit cards and personal loans to help debtors.

 

"Past measures that have been rolled out have not yet been fully evaluated," said Kobsidthi Silpachai, head of capital market research at Kasikornbank.

 

The BOT has hit its "limits on rate policy easing" as the virus lockdown has ended and the economy is back in action, ING economist Prakash Sakpal said in a research report.

 

Thailand has removed most restrictions to revive Southeast Asia's second-largest economy as there has been no local virus transmissions for 28 days.

 

Nomura economist Charnon Boonnuch predicted no policy change this week but a further easing in the third quarter "due to a sharp economic contraction and negative headline inflation".

 

The central bank recently said the economy could shrink this year more than earlier expected. In March, it forecast a 5.3% contraction, the worst since the 1997-98 Asian financial crisis. It will offer updated economic forecasts after the meeting.

 

(Additional reporting by Satawasin Staporncharnchai; Editing by Kim Coghill)

 

-- © Copyright Reuters 2020-06-23

 

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[ExpatOilWorker]

Just take the E out of SME's, there are 300% growth in SM loans, from 400 billion to 1.2 trillion baht.

 

[Isaan sailor]

Sure, leave rates pat.  So the Baht can rise even further—to collapse exports and western tourism...

[Trillian]

16 hours ago, Isaan sailor said:

Sure, leave rates pat.  So the Baht can rise even further—to collapse exports and western tourism...

You don't seem to understand that it's not the Baht that's the problem, it's USD that has been weakening in almost a straight line since the start of April, that has moved the USD/THB pair from 33.0 to 31.0 and the forecasts are that it will keep moving down. The US seems to want a weaker Dollar, it's good for their imports in an election year, there is no longer a dollar liquidity crisis and the weaker dollar helps the emerging countries economic recovery. A weaker Dollar also results in increased FDI, USD capital inflows into Thailand looking for an investment home and benefiting from Baht strength, we saw this in spades in early June.

 

The other aspect of a weaker dollar is a change in strategy by The Fed. who is now practising yield curve control and is trying to keep longer term yields low, there's a useful piece on this here:  https://www.bloomberg.com/opinion/articles/2020-06-23/a-weaker-dollar-is-just-what-the-world-needs-kbrffirm?srnd=premium-asia

 

I believe Thailand doesn't care that much about international tourism income at this stage, they've already said they're not going to chase numbers any more, it's a lower priority than before and their actions in restricting access confirms that. Exports is another story, they could be hurt by the stronger Baht but Thai exporters have lived with 29.x previously so we still have some way to go. I'm betting that BOT will borrow a part of their 1 trillion bail out loan in USD at a time when THB is strong and USD is weak, a fixed forward exchange rate would make for very cost effective borrowing and would also dampen the strength of THB and help exports.

 

Lastly is the effect of a weakening USD on the Pound which is also following a downwards path, it's getting close to a twenty four year low against THB and I can't see anything in the UK economy that would prevent that from plumbing new lows.

Edited June 23, 2020 by Trillian

[Isaan sailor]

Faced with an immanent shut down of the US economy last April, the Fed had little choice but to step in and reduce interest rates and buying bonds, corporate and government.  You can’t blame the Fed for backstopping the economy.  Wuhan virus hit America broadside—whether intentionally or accidentally.

We suffer the consequences here in LoS.

[Trillian]

16 minutes ago, Isaan sailor said:

Faced with an immanent shut down of the US economy last April, the Fed had little choice but to step in and reduce interest rates and buying bonds, corporate and government.  You can’t blame the Fed for backstopping the economy.  Wuhan virus hit America broadside—whether intentionally or accidentally.

We suffer the consequences here in LoS.

No I don't blame the Fed. But we all need to be clear that today's issue of poor USD/THB exchange rates is a function of USD weakness and not some evil plot or lack of action by BOT as you seem to indicate in several posts. And the issue of interest rates is a red herring when it comes to the exchange rate presently, leaving it where it is does will not in itself cause THB to strengthen.

Edited June 24, 2020 by Trillian

[Airalee]

On 6/23/2020 at 6:52 AM, ExpatOilWorker said:

Just take the E out of SME's, there are 300% growth in SM loans, from 400 billion to 1.2 trillion baht.

 

It’ll be interesting to see the Q2/2020 NPL (and the adjusted Q1) figures.

[Trillian]

I read that late payment for exports is up 195% and that insurance claims to the export import bank for defaults are up almost 250%, EXIM is working on the basis of an 8% decline in exports this year.

[Mavideol]

2 hours ago, Trillian said:

No I don't blame the Fed. But we all need to be clear that today's issue of poor USD/THB exchange rates is a function of USD weakness and not some evil plot or lack of action by BOT as you seem to indicate in several posts. And the issue of interest rates is a red herring when it comes to the exchange rate presently, leaving it where it is does will not in itself cause THB to strengthen.

weakening of the USD is quite normal on an election year, unfortunately we should expect more lowering of USD as Trump wants to show strong exports in hopes of changing electoral trend to his advantage

[ExpatOilWorker]

4 hours ago, Airalee said:

It’ll be interesting to see the Q2/2020 NPL (and the adjusted Q1) figures.

We can keep an eye out for the NPL numbers here:

https://www.bot.or.th/App/BTWS_STAT/statistics/BOTWEBSTAT.aspx?reportID=794&language=ENG

 

[userabcd]

On 6/23/2020 at 2:01 PM, Isaan sailor said:

Sure, leave rates pat.  So the Baht can rise even further—to collapse exports and western tourism...

Western and foreign tourists are all eagerly waiting for a return to Thailand.