BOT Says Rates to Continue Rising Until Economy Reaches Full Potential

[snoop1130]

 

BANGKOK (NNT) - The Bank of Thailand (BOT) has confirmed that key interest rates will continue to rise until the economy grows at its full potential and inflation returns to target, with gradual policy normalization still appropriate.

 

The central bank said in a statement issued for an analysts’ meeting that monetary tightening globally has had a limited impact on the nation’s financial conditions.

 

The outlook for Thailand’s economy and inflation have been in line with expectations, but the BOT said it is ready to adjust the pace of further rate hikes if the outlook shifts.

 

BOT Assistant Governor Piti Disyatat told the meeting that the economy is expected to fully recover in the second half of 2023, when inflation should also return to within the target range of 1-3%. He added that the rate committee would decide the terminal rate based on the economy in the second half of 2023.

 

The BOT has raised its key rate by a total of 75 basis points in three meetings since August, from a record low of 0.5%. It will next review policy on January 25, when economists expect a further hike.

 

The assistant governor also noted that slowing global economic growth should not have a big impact on foreign tourist numbers as most of them are from Asia, where economies are still doing well.

 

Source: https://thainews.prd.go.th/en/news/detail/TCATG221221002522133

 

-- © Copyright NNT 2022-12-21

 

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[tomazbodner]

25 minutes ago, snoop1130 said:

key interest rates will continue to rise until the economy grows at its full potential

That's oxymoron. Increasing rates cools economy.... ???

 

What's next? Let's continue lowering everyone's salaries until they are rich?

Edited December 21, 2022 by tomazbodner

[ThailandRyan]

If you do not count the unemployed, and then count the stimulus measures in as far as giving people money to help the economy, are you really assisting the inflation downward or is it still the same and climbing.  Why raise energy rates, why raise gas prices, well the costs are increasing and no inflation is not dropping....blind leading the blind here.  BTW how are 10 million tourists, very few of which are using USD assisting the baht in staying so strong against the USD?

[nigelforbes]

16 minutes ago, ThailandRyan said:

If you do not count the unemployed, and then count the stimulus measures in as far as giving people money to help the economy, are you really assisting the inflation downward or is it still the same and climbing.  Why raise energy rates, why raise gas prices, well the costs are increasing and no inflation is not dropping....blind leading the blind here.  BTW how are 10 million tourists, very few of which are using USD assisting the baht in staying so strong against the USD?

"BTW how are 10 million tourists, very few of which are using USD assisting the baht in staying so strong against the USD?"

 

Arriving foreign tourists exchange their home currency for THB in Thailand, that currency is then sold to BOT in exchange for THB which tourists then spend here. The foreign currency that was received, then become part of BOT's Foreign Currency Reserves which grow in volume and are accounted for in USD. Part I of the answer is that the income from those 10 million tourists results in the Current Account being in surplus, which is one of the key factors that causes currency strengthening. Part II of the answer is that the Foreign Currency Reserves are seen to grow, which is also a key factor that causes currency strengthening. Put the two parts together and foreign currency exchange dealers are presented with a robust picture of the Thai economy, which causes THB to increase or at least maintain value.

 

 

[nigelforbes]

27 minutes ago, ThailandRyan said:

If you do not count the unemployed, and then count the stimulus measures in as far as giving people money to help the economy, are you really assisting the inflation downward or is it still the same and climbing.  Why raise energy rates, why raise gas prices, well the costs are increasing and no inflation is not dropping....blind leading the blind here.  BTW how are 10 million tourists, very few of which are using USD assisting the baht in staying so strong against the USD?

"If you do not count the unemployed, and then count the stimulus measures in as far as giving people money to help the economy, are you really assisting the inflation downward or is it still the same and climbing". 

 

You seem confused about what question you want to ask, you've included a number of issues here which when linked into a question, don't make sense. Perhaps ask your question a different way, try rephrasing it.

 

"Why raise energy rates, why raise gas prices",

 

Oil and gas are imports denominated in USD, the oil stabilization fund is deeply in debt and needs to be replenished. Consumer prices have been kept artificially low for a long time and this has been costly. Now that the economy is starting to recover, it's time to recoup some of that expenditure.

[Onerak]

What interest rates are Thai banks giving to savers? US high yield saving accounts have reached 4% and some CD rates have reached 5% due to Fed's interest rate hikes to cool down the economy. 

[nigelforbes]

1.5% or 2% thereabouts, the base rate here is much lower at present than in the US plus banks have not passed along all the interest rate rises to consumers. 

[Harsh Jones]

All central banks are controlled by one center in the world. That is why literally all of them are raising rates now. They are gonna keep raising till the house of cards comes tumbling down just like the hike cycle in 2006-2008. Which is strange because unlike 2008 where some companies were too big to fail, today the bubbles are too big to fail. 

[nigelforbes]

47 minutes ago, Harsh Jones said:

All central banks are controlled by one center in the world. That is why literally all of them are raising rates now. They are gonna keep raising till the house of cards comes tumbling down just like the hike cycle in 2006-2008. Which is strange because unlike 2008 where some companies were too big to fail, today the bubbles are too big to fail. 

Nonsense, all central banks are not owned by one center or by the man in the moon.

[Mickeymaus]

1 hour ago, Harsh Jones said:

All central banks are controlled by one center in the world. That is why literally all of them are raising rates now. They are gonna keep raising till the house of cards comes tumbling down just like the hike cycle in 2006-2008. Which is strange because unlike 2008 where some companies were too big to fail, today the bubbles are too big to fail. 

That appears to be the case now that the bubbles are considered too big to fail. The USA in particular seems to be dominated to a certain extent by the stock markets. And the Euro zone by the countries with the biggest debts. 

[Harsh Jones]

38 minutes ago, nigelforbes said:

Nonsense, all central banks are not owned by one center or by the man in the moon.

I never said they were owned by one center. They are coordinated by one center. The Bank of International Settlements. As it basically says on their Wiki page. And yes. The BOT is a member. 

 

The Bank for International Settlements (BIS) is an international financial institution^[2] owned by central banks that "fosters international monetary and financial cooperation and serves as a bank for central banks".

 

Do you think interest rates are set by the "free market" or something ?

Edited December 21, 2022 by Harsh Jones

[nigelforbes]

1 minute ago, Harsh Jones said:

I never said they were owned by one center. They are coordinated by one center. The Bank of International Settlements. As it basically says on their Wiki page. And yes. The BOT is a member. 

 

The Bank for International Settlements (BIS) is an international financial institution^[2] owned by central banks that "fosters international monetary and financial cooperation and serves as a bank for central banks".

BIS is a settlements bank, as the name implies, it complete the actions and instructions undertaken by Central Banks, not the other way around! It is also safe custody on behalf of Central Banks, BOT's foreign currency reserves are held by BIS, not by BOT. It would be virtually impossible for any Central Bank to operate if it was not a member of BIS.

[Isaan sailor]

Brilliant strategy—jack the Baht up.  That will stimulate the economy…NOT.

[nigelforbes]

1 minute ago, Isaan sailor said:

Brilliant strategy—jack the Baht up.  That will stimulate the economy…NOT.

Which would you like to do, reduce exports or reduce tourism because those are the only two things that will reduce the value of THB?

[jacko45k]

13 hours ago, tomazbodner said:

That's oxymoron. Increasing rates cools economy.... ???

 

What's next? Let's continue lowering everyone's salaries until they are rich?

Yes, he did not phrase it well but I see what he means.

Be nice to get a bit of interest on my 800k!

[Harsh Jones]

2 minutes ago, nigelforbes said:

BIS is a settlements bank, as the name implies, it complete the actions and instructions undertaken by Central Banks, not the other way around! It is also safe custody on behalf of Central Banks, BOT's foreign currency reserves are held by BIS, not by BOT. It would be virtually impossible for any Central Bank to operate if it was not a member of BIS.

You didn't answer the question. 

 

So you think its just a coincidence that every central bank mouthpiece across the planet just so happened to go from about 15 years of expansionary policy to rate hikes and it was all a coincidence ? 

 

Get real. Markets don't determine the emission of credit or interest rates. Administrative-command systems within central banks determine them. 

 

 

[RichardColeman]

BOT Says Rates to Continue Rising Until Economy Reaches Full Potential

 

I'm no financial wizard but raising rates higher will leave an economy unable to reach its full potential wont it ? 

[nigelforbes]

Just now, Harsh Jones said:

You didn't answer the question. 

 

So you think its just a coincidence that every central bank mouthpiece across the planet just so happened to go from about 15 years of expansionary policy to rate hikes and it was all a coincidence ? 

 

Get real. Markets don't determine the emission of credit or interest rates. Administrative-command systems within central banks determine them. 

 

 

The US equities market is the biggest, it accounts for about 50% of the planets investments in equities and investment markets. USD is the major reserve currency, over 60% of global exports are denominated in USD, oil is priced in USD. Whatever happens to US equities, whatever happens to the value of USD, the contagion effect ensures that the impact is transmitted around the world, to every economy, within days if not hours.

 

If the US hikes interest rates, countries with lower rates see capital outflows as investors go to the US mainland and invest in USD based assets. No this is not coincidence, this is the reality of the US being the dominant market in the world and USD being the dominant currency.

 

Finally, Central Banks don't act entirely on their own initiative, they are custodians of the country's currency and they act within the fiscal policy framework set by government, all of which vary from country to country. The US Fed has increased interest rates to 4.5%, BOT rate is 1.25%, Thailand has seen capital outflows as a result and must play catch up for the sake of its own economy and to keep inflation down. Those things are basic economics, not coordinated efforts.

[spidermike007]

BOT Assistant Governor Piti Disyatat is lost in space. There are a dozen variables. A worldwide recession, lower tourist spending, the effect increased rates will have on the economy. The list goes on and on. Predicting this is like predicting the lottery results. Absolute nonsense. 

[Isaan sailor]

34 minutes ago, nigelforbes said:

Which would you like to do, reduce exports or reduce tourism because those are the only two things that will reduce the value of THB?

A rapidly rising Baht would accomplish this—discourage tourism and reduce exports.  We’re both right—depends on which side of the telescope you look through.

[nigelforbes]

Just now, spidermike007 said:

BOT Assistant Governor Piti Disyatat is lost in space. There are a dozen variables. A worldwide recession, lower tourist spending, the effect increased rates will have on the economy. The list goes on and on. Predicting this is like predicting the lottery results. Absolute nonsense. 

This is a story about the competitiveness of Central Bank interest rates, which attract or repel foreign capital investment, along with a desire to reduce inflation, BOT has almost no choice in this matter. 

[nigelforbes]

1 minute ago, Isaan sailor said:

A rapidly rising Baht would accomplish this—discourage tourism and reduce exports.  We’re both right—depends on which side of the telescope you look through.

THB is not a rapidly rising currency, USD has weakened in recent days from a DI level of 114% to its current 104%. That may have made it feel like THB is strengthening, in fact, USD has weakened. THB has been broadly flat.

[jacko45k]

27 minutes ago, Isaan sailor said:

A rapidly rising Baht would accomplish this—discourage tourism and reduce exports.  We’re both right—depends on which side of the telescope you look through.

Getting a bit chicken or egg now......

Reduce the cost of oil and gas imports and get my electric bill down!

Improve the price of the house then I can sell and get out of dodge!

[ThailandRyan]

1 hour ago, jacko45k said:

Yes, he did not phrase it well but I see what he means.

Be nice to get a bit of interest on my 800k!

In a 2 year period my 800k made a measely 6,565 Thb.  Since I now have the LTR Visa and no need for the account it sat in, and yes I checked on a new rate which was less than 1%, I closed the account and repatriated the funds back into a HYS Account making 4.5% interest in the US. Unless one is Thai you can not be given access to the better rates here, well maybe with a work permit.

[nigelforbes]

4 minutes ago, jacko45k said:

Getting a bit chicken or egg now......

Reduce the cost of oil and gas imports and get my electric bill down!

Improve the price of the house then I can sell and get out of dodge!

Unfortunately the price of oil and gas imports are set on the world stage, not by Thailand. But I'd be surprised to see much change in property prices here, no matter what happens.

[nigelforbes]

1 minute ago, ThailandRyan said:

In a 2 year period my 800k made a measely 6,565 Thb.  Since I now have the LTR Visa and no need for the account it sat in, and yes I checked on a new rate which was less than 1%, I closed the account and repatriated the funds back into a HYS Account making 4.5% interest in the US. Unless one is Thai you can not be given access to the better rates here, well maybe with a work permit.

A perfect example of capital outflows, because the interest rate here is lower than in the US.

 

The best rate ANYONE can get here, be they Thai of foreigner, is under 2%.

[jacko45k]

8 minutes ago, nigelforbes said:

Unfortunately the price of oil and gas imports are set on the world stage, not by Thailand. But I'd be surprised to see much change in property prices here, no matter what happens.

Yes but a stronger baht makes the price based in USD less, so your point is a bit silly really. Property prices are going to rise here with demand.... rentals are already going up, from Covid lows yes, but up they go. 

Edited December 22, 2022 by jacko45k

[ThailandRyan]

8 minutes ago, jacko45k said:

Yes but a stronger baht makes the price based in USD less, so your point is a bit silly really. Property prices are going to rise here with demand.... rentals are already going up, from Covid lows yes, but up they go. 

House near us was at 18.2 MThb in July. December 1st the owner raised the price to 19.9 MThb. Before the price was raised they had no one look at for the 5 months it was on the market at the lower price. Since then there have been many viewings.  Yesterday they accepted an offer for 19.5 MThb. Prices are going up.  Of course it's now high season and folks with money from overseas are getting ready for retirement. The Southern Hua Hin area near Pranburi is growing.

[nigelforbes]

31 minutes ago, jacko45k said:

Yes but a stronger baht makes the price based in USD less, so your point is a bit silly really. Property prices are going to rise here with demand.... rentals are already going up, from Covid lows yes, but up they go. 

Again, a double edged sword. A stronger Baht does indeed make imports cheaper but it also makes exports uncompetitive. You can't look at just the upside.

[jacko45k]

2 minutes ago, nigelforbes said:

Again, a double edged sword. A stronger Baht does indeed make imports cheaper but it also makes exports uncompetitive. You can't look at just the upside.

I wasn't, I was actually responding to someone only looking at the downside. As someone who transfers money here from overseas to live on, it does not go un-noticed. My Sterling has been tumbling since mid-December.