Thai central bank says key rate to stay low for 1-2 years

[snoop1130]

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

 

BANGKOK (Reuters) - Thailand's benchmark interest rate may stay at a record low of 0.5% for one or two years until the economy has seen a clear recovery, a central bank official said on Monday, as the country deals with a third wave of COVID-19 infections.

 

Inflation may rise temporarily but stagflation is not expected, Don Nakornthab, senior director at the Bank of Thailand (BOT), told an economic forum.

 

Inflation in the second quarter may exceed the BOT's target range of 1% to 3%, but that will be temporary due to a low base last year, he said.

 

"Stagflation is very least likely. A more concern is inflation will not rise," Don said.

 

The BOT has left its policy rate unchanged since mid-2020 and warned of the impact of the current outbreak, which has accounted for about 80% of Thailand's total cases and deaths.

 

It will next review policy and economic outlook on June 23.

 

"The policy rate is at record low and will probably stay at this level for a while. In a year or two, there may not be an increase," Don said.

 

The distribution of vaccines will be the most important factor for reviving the tourism-reliant economy, he said. Mass vaccinations will start next month.

 

The BOT has said the policy rate level was not an issue and the problem was the distribution of liquidity to needed areas.

 

"Cutting rates further will not help anything," Kanit Sangsubhan, a member of the BOT's monetary policy committee, told the forum.

 

The outbreak will worsen the country's high household debt, now around 89% of gross domestic product (GDP), Don said.

 

Thailand's public debt to GDP ratio can go higher than its ceiling of 60% if necessary as it remains relatively low compared with some other countries, Don said.

 

Thailand's new borrowing of 700 billion baht ($22.3 billion) approved last week would be for supporting the economy into next year, finance ministry official Pisit Puapan said.

 

-- © Copyright Reuters 2021-05-24

 

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[ThailandRyan]

3 minutes ago, snoop1130 said:

stagflation is not expected, Don Nakornthab, senior director at the Bank of Thailand (BOT), told an economic forum.

 

Inflation in the second quarter may exceed the BOT's target range of 1% to 3%,

 

"Stagflation is very least likely. A more concern is inflation will not rise," Don said

Think he needs to check with an economist who gave the BP an interview and discussed stagflation occuring.

[Mavideol]

33 minutes ago, snoop1130 said:

"Cutting rates further will not help anything," Kanit Sangsubhan, a member of the BOT's monetary policy committee, told the forum.

how do you know, if it will not help anything why other countries, with a recovering economy,  did it. Better give it a try and see where it goes because leaving it as it is sure is not helping anything, Baht still strong

[JimHuaHin]

Let us wait until the end of the year to see if this is correct.

 

Several recent articles in international financial press have raised the possibility of interest rates increasing soon in the USA and teh EU; if this happens then many countries will have to raise their rates to prevent the outflow of capital.

[Pedrogaz]

Cue massive inflation. Good move.

[Isaan sailor]

Yeah right.  Let the Baht keep rising. To Hell with exports and tourists.

[ThailandRyan]

2 minutes ago, Isaan sailor said:

Yeah right.  Let the Baht keep rising. To Hell with exports and tourists.

If they cut the rate, and then other countries raised theirs then the exports would drop and then the truth of Stagflation would be seen.  They are in for a world of urt as all other countries are well into a recovery of sorts......