How long can Thailand’s central bank swim against the tide?

[webfact]

Should the BOT raise the policy rate and commercial banks by raising their lending and deposit rates, it would be a blow to borrowers, especially those with mortgage and car-hire purchase debt. (Photo by Jack TAYLOR / AFP)

 

By Thai PBS World’s Business Desk

 

The Bank of Thailand (BOT) has come under high pressure to react as domestic inflation has been climbing fast and other central banks, especially the US Federal Reserve (Fed), have started to raise their interest rates.

 

Many countries have been suffering from high inflation due to rising prices of oil, natural gas and food, as well as from the consequences of loosening monetary and fiscal policies aimed at boosting economic growth amid the COVID-19 outbreak.

 

Thailand’s headline inflation hit a 13-year-high in May, rising 7.1 percent. It was even worse in the US where it climbed as high as 8.6 percent, a 40-year-high for the country, which compelled the Fed to raise its benchmark funds rate by 0.75 percentage point on June 15. It was the biggest rate hike in 28 years, bringing the Fed funds rate to a range of 1.5-1.75 percent.

 

Source: https://www.thaipbsworld.com/how-long-can-thailands-central-bank-swim-against-the-tide/

 

-- © Copyright Thai PBS 2022-06-21

 

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[Pattaya Spotter]

No very long.

[Will B Good]

If the purpose of raising interest rates is to take money out of people's pockets to curb inflation.........then in a country where most people don't have two pennies to rub together and who are probably in serious debt, I don't see how this works. 

[sammieuk1]

The repo man will be very busy and the rich will be fleeing with as much cash as they can skim off the poor before departure is what I'm seeing in the Thai news ????

[ezzra]

31 minutes ago, Will B Good said:

If the purpose of raising interest rates is to take money out of people's pockets to curb inflation.........then in a country where most people don't have two pennies to rub together and who are probably in serious debt, I don't see how this works. 

Do you know of any other ways to which you can curb inflation without raising rates? if so, there are many governments who would love to know about it as bigger and wealthier countries are doing it why not Thailand?...

[Will B Good]

4 minutes ago, ezzra said:

Do you know of any other ways to which you can curb inflation without raising rates? if so, there are many governments who would love to know about it as bigger and wealthier countries are doing it why not Thailand?...

So you didn't read my post?

 

Of course it is effective in richer countries....doh!

[mikebell]

They've got lots of 800K deposits from farangs; this way they dodge paying them any interest.

[Boomer6969]

43 minutes ago, ezzra said:

Do you know of any other ways to which you can curb inflation without raising rates?

Limit and/or delay wage [pensions, benefits, etc.] rises. 

Edited June 21, 2022 by Boomer6969

[ThailandRyan]

1 hour ago, sammieuk1 said:

The repo man will be very busy and the rich will be fleeing with as much cash as they can skim off the poor before departure is what I'm seeing in the Thai news ????

I have seen more growing locations where they have the Tents set up with the used cars for sale in Bangkok and even south here in Prachuap Khiri Khan.....folks are running out of money for daily living.  Fuel prices are also an issue.  Paid 54.4 thb for my 95 fuel to put in my MG, not sure how the worker bees can keep filling up....

[spidermike007]

Not sure what real inflation is here, but in the US it is likely over 20%, at this time. If you take into account products and services that mean something to the masses, not the ones they count to come up with these fake and misleading numbers. Inflation back there is historic. It is insane. It is unsustainable, and I believe it is largely driven by corporate gouging, using covid as a cover. It is positively heinous what they are doing, and is a good example of mankind showing it's lower nature during a pandemic. 

[Excel]

Just now, spidermike007 said:

Not sure what real inflation is here, but in the US it is likely over 20%, at this time. If you take into account products and services that mean something to the masses, not the ones they count to come up with these fake and misleading numbers. Inflation back there is historic. It is insane. It is unsustainable, and I believe it is largely driven by corporate gouging, using covid as a cover. It is positively heinous what they are doing, and is a good example of mankind showing it's lower nature during a pandemic. 

I think it is not just here and the US, rather worldwide as so many companies are global institutions these days and with the connivance of corrupt governments ( and that is mostly all of them ) they are fleecing most of the world.

[Chelseafan]

3 hours ago, Will B Good said:

If the purpose of raising interest rates is to take money out of people's pockets to curb inflation.........then in a country where most people don't have two pennies to rub together and who are probably in serious debt, I don't see how this works. 

I think the idea of raising interest rates is to stop people borrowing but in a culture where this is endemic, you're right. It will have little effect on the man on the street.

 

[RafPinto]

That would completely kill the real estate market.
Look at the thousand of unsold condos.
Hundreds of new project recently started.

Bob the builder h..eal..th minister must sell his projects.

[RichardColeman]

4 hours ago, webfact said:

It was even worse in the US where it climbed as high as 8.6 percent, a 40-year-high for the country

Shh, don't tell daft, sleepy joe, he's quoting the US as the lowest inflation in the world along with the biggest growth in the world.

[kimamey]

17 minutes ago, RichardColeman said:

Shh, don't tell daft, sleepy joe, he's quoting the US as the lowest inflation in the world along with the biggest growth in the world.

I haven't really kept up with all this but I think it's higher in the UK. If it isn't it soon will be

Of course the inflation rate for each section of society are different. Poorer households are usually affected more. 

[Walker88]

49 minutes ago, RichardColeman said:

Shh, don't tell daft, sleepy joe, he's quoting the US as the lowest inflation in the world along with the biggest growth in the world.

There is precious little understanding of economics evidenced in this forum.

 

Inflation is not instantaneous. It builds up over time, and then gets juiced by marginal issues. It's like a dam where one ignores the cracks and leaks until the thing bursts.

 

After the crisis that began under Bush II, the Fed embarked on ZIRP. That set the ball rolling in the wild speculation that brought back the housing market and made credit easy. Under 45 the National Debt exploded by $7,000,000,000,000, some of it due to spendthrift policies and a large part due to the tax cut. That is what really got inflation in motion. In my analogy the dam cracked and the leaks began. Bad luck whoever is in power when it inevitably bursts, because they will get the blame.)

 

Then came Covid and all of the aid handed out. Then as Covid came to an end all the pent up demand for everything from driving to travel to clothes juiced prices further. The fact much of the world relied on parts from China, at a time when China was locking down (disrupting supply chains) is another factor. The russian invasion of Ukraine exacerbated things further by driving up fossil fuel prices (risk premium), with help from wasteful  crypto mining, at a time when people around the world were driving back to work. Toss in the fact that roughly 18% of the world's wheat crop is no longer coming to market, and all of that combined to bring about worldwide inflation.

 

It will get worse in nations whose currency is tumbling vs the dollar, because this is one of the few times when oil and the dollar rise together. The US will be spared some of that because oil is priced in dollars, but Thailand, Japan, the EU---really everywhere except the US and Middle East---is going to feel price inflation due to higher fuel and transport costs.

 

It is patently silly to blame Biden for all of this, though in the US, the repubs certainly are trying to do that. Blame the Fed for keeping its ZIRP for far too long, blame 45 for his profligacy, blame putin for invading a sovereign peaceful nation, blame Covid for postponing demand then unleashing it, and blame Covid/China again for their lockdowns and the resulting supply chain disruptions.

[Walker88]

3 hours ago, spidermike007 said:

Not sure what real inflation is here, but in the US it is likely over 20%, at this time. If you take into account products and services that mean something to the masses, not the ones they count to come up with these fake and misleading numbers. Inflation back there is historic. It is insane. It is unsustainable, and I believe it is largely driven by corporate gouging, using covid as a cover. It is positively heinous what they are doing, and is a good example of mankind showing it's lower nature during a pandemic. 

So what is your market basket that tells you inflation is 20%?

 

Do you know how these rates are calculated?

 

If the price of Spam rises 50%, it doesn't mean inflation is high, because Spam has minimal impact on the overall basket. Things like housing have much greater impact, and house prices are falling. Lumber and other inputs that go into house construction are falling. Everything gets collated, based on what an 'average consumer' purchases, and then a rate is calculated.

 

People tend to assume inflation is higher than it is because they notice certain things they regularly buy, forgetting that isn't the entire basket of goods that reflects the average consumer.

[Guderian]

Be careful what you wish for. The Baht is strong enough as it is, if they start hiking their interest rates we'll soon be back down to 30THB/USD and 35 THB/GBP.

[tubby johnson]

37 minutes ago, Walker88 said:

Blame the Fed for keeping its ZIRP for far too long, blame 45 for his profligacy, blame putin for invading a sovereign peaceful nation, blame Covid for postponing demand then unleashing it, and blame Covid/China again for their lockdowns and the resulting supply chain disruptions.

President Biden is conspicuous by his absence in your list of people to blame. No, it's not "patently silly" to blame Biden. He is the president, after all, and has got to take responsibility instead of his hollering "Putin!" and "Great MAGA King!" on the extremely rare occasions when he takes questions from the media. His spending policies aren't helping. Neither are his inaction and invisibility. Thankfully, people with more sense such as Senators Manchin and Sinema put a stop to Biden's wildest spending proposals. In an overheating economy, don't fan the flames. Be in charge and take responsibility.

[spidermike007]

1 hour ago, Walker88 said:

So what is your market basket that tells you inflation is 20%?

 

Do you know how these rates are calculated?

 

If the price of Spam rises 50%, it doesn't mean inflation is high, because Spam has minimal impact on the overall basket. Things like housing have much greater impact, and house prices are falling. Lumber and other inputs that go into house construction are falling. Everything gets collated, based on what an 'average consumer' purchases, and then a rate is calculated.

 

People tend to assume inflation is higher than it is because they notice certain things they regularly buy, forgetting that isn't the entire basket of goods that reflects the average consumer.

I don't care how the rates are calculated, as it is part of the official deception.

 

Cost of groceries.

Anything labor related. 

Tequila. 

Rent. 

Housing expenses. 

Restaurants. 

Cocktails at a bar. 

Car repairs. 

Clothing.

Lumber.

Appliances. 

Airfares. 

Hotel prices.

Getting laid. 

 

Did I leave anything out? Are you in the US or Europe, or are you just reading stuff? 

Edited June 21, 2022 by spidermike007

[arithai12]

5 hours ago, ThailandRyan said:

I have seen more growing locations where they have the Tents set up with the used cars for sale in Bangkok and even south here in Prachuap Khiri Khan.....folks are running out of money for daily living.  Fuel prices are also an issue.  Paid 54.4 thb for my 95 fuel to put in my MG, not sure how the worker bees can keep filling up....

Pump prices are going through the roof yes (except Diesel which is subsidized), but 54??

Did you mean 45?

[ThailandRyan]

12 minutes ago, arithai12 said:

Pump prices are going through the roof yes (except Diesel which is subsidized), but 54??

Did you mean 45?

Nope 54.46 for the top 95. Could use the 95 gasohol at 45.7, but my car does not get as good of fuel mileage. That was 2 days ago. Today it was 

Edited June 21, 2022 by ThailandRyan

[superal]

1 hour ago, Walker88 said:

There is precious little understanding of economics evidenced in this forum.

 

Inflation is not instantaneous. It builds up over time, and then gets juiced by marginal issues. It's like a dam where one ignores the cracks and leaks until the thing bursts.

 

After the crisis that began under Bush II, the Fed embarked on ZIRP. That set the ball rolling in the wild speculation that brought back the housing market and made credit easy. Under 45 the National Debt exploded by $7,000,000,000,000, some of it due to spendthrift policies and a large part due to the tax cut. That is what really got inflation in motion. In my analogy the dam cracked and the leaks began. Bad luck whoever is in power when it inevitably bursts, because they will get the blame.)

 

Then came Covid and all of the aid handed out. Then as Covid came to an end all the pent up demand for everything from driving to travel to clothes juiced prices further. The fact much of the world relied on parts from China, at a time when China was locking down (disrupting supply chains) is another factor. The russian invasion of Ukraine exacerbated things further by driving up fossil fuel prices (risk premium), with help from wasteful  crypto mining, at a time when people around the world were driving back to work. Toss in the fact that roughly 18% of the world's wheat crop is no longer coming to market, and all of that combined to bring about worldwide inflation.

 

It will get worse in nations whose currency is tumbling vs the dollar, because this is one of the few times when oil and the dollar rise together. The US will be spared some of that because oil is priced in dollars, but Thailand, Japan, the EU---really everywhere except the US and Middle East---is going to feel price inflation due to higher fuel and transport costs.

 

It is patently silly to blame Biden for all of this, though in the US, the repubs certainly are trying to do that. Blame the Fed for keeping its ZIRP for far too long, blame 45 for his profligacy, blame putin for invading a sovereign peaceful nation, blame Covid for postponing demand then unleashing it, and blame Covid/China again for their lockdowns and the resulting supply chain disruptions.

It is a combination of Ukraine and Russian wheat grain that is being held back from global distribution and is 30% of the world production . Gas stations in U.S.A. , petrol now $5.190 per gallon when from 2010 to 2020 it was averaging $2.6 per gallon . So although the US is producing oil , it is pushing up the prices at the pumps . The Ukraine war along with the covid pandemic is the root cause of many countries slow economic growth  . How Thailand calculates its GDP is a mystery when probably half the working population incomes are unknown to the government . The lower paid are going to suffer if and when there is an interest rate rise in Thailand . Currently Thailand's nominal household debt is 90% of its GDP and an increase in interest rates will weaken the Baht .

Further more , there are murmurs that the dollar will take a hit in the third quarter . Currencies will be unreliable assets and commodities will be a better investment . 

[arithai12]

3 minutes ago, ThailandRyan said:

Nope 54.46 for the top 95. Could use the 95 gasohol at 45.7, but my car does not get as good of fuel mileage.

But you omitted to put "top" in your original post.

[geisha]

6 hours ago, sammieuk1 said:

The repo man will be very busy and the rich will be fleeing with as much cash as they can skim off the poor before departure is what I'm seeing in the Thai news ????

Inflation is world wide, no escaping. some reports state that it could go very much higher.

[Cake Monster]

6 hours ago, ezzra said:

Do you know of any other ways to which you can curb inflation without raising rates? if so, there are many governments who would love to know about it as bigger and wealthier countries are doing it why not Thailand?...

It is my opinion, that Thailand has not, and will not raise Interest rates any time soon.

They will just let the people suffer with the increased Inflation.

The Government essentially is terrified of the backlash that this would cause throughout Thai Society.

House prices / Building costs are set to rise by some 5 % or so ( more like 10 % ), and this means Developers will incur additional charges on any Money borrowed from the Banks Etc, along with being burdened with Property they have less chance of selling due to increased Mortgage Rates and diminished demand.

The property Market has been on its rear end now for some Years, and any increase in Interest Rates would be a major issue in the loss of Revenue stream for the Government, and with Household Debt at record levels of near 100 % of GDP, any increase would push many more people over the edge into default on their Loans.

Either way the Government play the issue of inflation, they are running the risk of riots on the streets again, and this is something they desperately have to avoid to help the Tourism sector recover.

 

 

[RichardColeman]

2 hours ago, Walker88 said:

It is patently silly to blame Biden for all of this, though in the US, the repubs certainly are trying to do that.

Think you will find that my post makes absolutely no claim that Biden is responsible for 'all' of the inflation or 'growth'. HOWEVER, Biden is either lying to the public deliberately OR lying as he is being told the wrong thing. Biden is either a liar or out of touch, pick one ? Either way he is simply not fit mentally to the job. 

[ThailandRyan]

4 minutes ago, arithai12 said:

But you omitted to put "top" in your original post.

Sorry, I figured most would understand what I posted.  I just posted Shells prices today. Just filled up with tge Gasohol 95 non V-power.  Let's see what I get fuel wise on the way back to BKK from Pranburi.

[superal]

5 minutes ago, Cake Monster said:

It is my opinion, that Thailand has not, and will not raise Interest rates any time soon.

They will just let the people suffer with the increased Inflation.

The Government essentially is terrified of the backlash that this would cause throughout Thai Society.

House prices / Building costs are set to rise by some 5 % or so ( more like 10 % ), and this means Developers will incur additional charges on any Money borrowed from the Banks Etc, along with being burdened with Property they have less chance of selling due to increased Mortgage Rates and diminished demand.

The property Market has been on its rear end now for some Years, and any increase in Interest Rates would be a major issue in the loss of Revenue stream for the Government, and with Household Debt at record levels of near 100 % of GDP, any increase would push many more people over the edge into default on their Loans.

Either way the Government play the issue of inflation, they are running the risk of riots on the streets again, and this is something they desperately have to avoid to help the Tourism sector recover.

 

 

Interest rate rise or no rise , there could well be a downturn on property values .  Things are about to happen in Thailand and your last paragraph may be on the cards . There are all ready protests in other countries concerning the cost of living .

[bigupandchill]

Interest rates effect exchange rates which are important for everyone.