Will Sethaput meet the fate of BOT governors defying the government?

[webfact]

Bank of Thailand (BOT) Governor Sethaput Suthiwartnarueput is yielding no ground in his face-off with Prime Minister Srettha Thavisin over the central bank’s interest rate policy.

 

Against the backdrop of slowing economic growth, Srettha wants the BOT to lower the interest rate from the current 2.5 per cent per annum, the highest in nearly a decade.

 

The central bank’s Monetary Policy Committee (MPC) has turned a deaf ear to the government’s exhortations and left the rate unchanged at its two previous meetings.

 

The MPC is scheduled to hold its next meeting in April. Srettha, however, wants the MPC to call an emergency meeting to lower the rate.

 

His call came after the National Economic and Social Development Council (NESDC), a state think-tank, released a report on the gross domestic product in 2023: GDP grew by only 1.9 per cent, well below expectations and slower than the 2.5 per cent growth in the previous year.

 

NESDC secretary-general Danucha Pichayanan also urged the central bank to seriously consider a rate cut in order to cushion the blow on citizens from the higher cost of living.

 

He also wanted the central bank to relax rules on credit card payments, suggesting that the minimum monthly installment payment be reduced from 8 per cent at present to 5 per cent, as the central bank had done during the COVID-19 pandemic. Lowering the credit card installment would offer relief to credit card debtors, Danucha argued.

 

Despite facing pressure from both PM Srettha and senior bureaucrats, Sethaput is showing no signs of heeding the call for an MPC emergency meeting to consider a rate cut.

 

By Thai PBS World’s Business Desk

File photo : Bank of Thailand Governor Sethaput Suthiwartnarueput //Reuters

 

Full story: Thai PBS 2024-02-26

 

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[flyingtlger]

16 minutes ago, webfact said:

The central bank’s Monetary Policy Committee (MPC) has turned a deaf ear to the government’s exhortations and left the rate unchanged at its two previous meetings.

The Golden Rule, "He who has the gold, makes the rules".......

[Artisi]

1 hour ago, flyingtlger said:

The Golden Rule, "He who has the gold, makes the rules".......

that's correct and the one who holds the gold is untouchable ......... 😉😉 

[Geoffggi]

Maybe the PM should take a breath, step back & listen to the advice of professional bankers .........

[Mike Lister]

Maybe turn the question around, will the PM face the same fate as others who have tried to bully the BOT Gov. 

 

Case in point, ex Governor Tarisa Watanagase who, when attacked by government, was publicly thanked for her sound stewardship of national monetary policy and all her hard work, ....long silence followed.

[ikke1959]

Of course he want a lower interest rate.. He needs to borrow a lot for his 10k scheme and with the current interest rates it will be difficult and Sethra thinks with a lower rate it is easier to get approval of the senate

[Srikcir]

Does Prime Minister Srettha Thavisin not understand how interest rates are determine by BOT/MPC?

The Governor does not make the sole determination.

 

The 7-member MPC votes on the rate determined by majority vote. Recently, the Committee voted 5 to 2 to maintain the policy rate at 2.50 percent that is consistent with preserving macro-financial stability, a key foundation for sustainable growth in the longer term. Two MPC members voted to cut the policy rate by 0.25 percentage points to reflect a lower potential growth as a result of structural challenges.  

https://www.bot.or.th/en/news-and-media/news/news-20240207.html

 

PM Thavisin seems more driven by political urgency to stay in power than he is by actual economic realities.

It's illegal to gamble in Thailand. Yet, that's what PM Thavisin seems to want the MPC to do in establishing interest rates based on hopeful outcome of future events. Isn't that the same as betting in a game of roulette - illegal in Thailand.

 

 

 

 

[Dogmatix]

8 hours ago, Mike Lister said:

Maybe turn the question around, will the PM face the same fate as others who have tried to bully the BOT Gov. 

 

Case in point, ex Governor Tarisa Watanagase who, when attacked by government, was publicly thanked for her sound stewardship of national monetary policy and all her hard work, ....long silence followed.

 

I don't remember Tarisa, whom I was at Harvard with, being either attacked by the government or thanked for her stewardship of monetary policy.  Sadly for her she was largely discredited soon after becoming governor because she was pressurised by her mentor the previous governor, ML Pridyathorn, who had been upgraded as coup government finance minister, into introducing capital controls for foreign portfolio investors which crashed the stock market and had to be rescinded a couple of weeks later with Pridyathorn famously saying that the SET didn't need foreign investors anyway.  

 

The problem was that Tarisa actually had no experience of monetary policy whatsoever, as she had spent her entire career at the BOT on the supervisory side, of which she was head before she became governor. So she didn't feel in a position to resist the pressure from her mentor in the government to make a catastrophic policy error, which is unfortunately what she is remembered for. I am not sure in what sense she was attacked by the government over monetary policy when she actually did exactly what the government asked without question and no one thanked her for it. 

 

It was sad because Tarisa had a very distinguished career in financial supervision and revived the reputation of the central bank in that area which was in tatters after the BBC scandal and the Tom Yam Kung crisis which was kicked off by the collapse of Finance One two weeks after the BOT gave it a clean bill of health following its annual audit.  They actually thought Finance One was such a fabulous example of a well run finance company that they had given it approval to acquire a small bank. 

 

What Tarisa was famous for before she ruined her own reputation was in standing up to the Thaksin regime which had busied itself looting Krung Thai Bank when she was head of financial supervision.  The Thaksinite finance ministry kept trying to get her to call off the dogs and threatening her but she never backed down and the CEO of KTB went to prison.  Thaksin's son narrowly avoided prison, despite what seemed on the surface to be a fairly open and shut case of receiving funds stolen from KTB and laundering them.  

Edited February 26 by Dogmatix

[Dogmatix]

There is no justification for reducing rates at this point but this is Thaksin's style. He did same think in the first Thaksin govt and fired the governor of the BOT.  Repeating this type of nonsense and repeating the land bridge project along with the vote buying digital wallet shows how bereft he is of new ideas now but is nevertheless determined to get firmly behind the policy steering wheel again.  How sad for Thailand to have someone like that in charge again when they voted for a different party anyway.

[Mike Lister]

18 minutes ago, Dogmatix said:

 

I don't remember Tarisa, whom I was at Harvard with, being either attacked by the government or thanked for her stewardship of monetary policy.  Sadly for her she was largely discredited soon after becoming governor because she was pressurised by her mentor the previous governor, ML Pridyathorn, who had been upgraded as coup government finance minister, into introducing capital controls for foreign portfolio investors which crashed the stock market and had to be rescinded a couple of weeks later with Pridyathorn famously saying that the SET didn't need foreign investors anyway.  

 

The problem was that Tarisa actually had no experience of monetary policy whatsoever, as she had spent her entire career at the BOT on the supervisory side, of which she was head before she became governor. So she didn't feel in a position to resist the pressure from her mentor in the government to make a catastrophic policy error, which is unfortunately what she is remembered for. I am not sure in what sense she was attacked by the government over monetary policy when she actually did exactly what the government asked without question and no one thanked her for it. 

 

It was sad because Tarisa had a very distinguished career in financial supervision and revived the reputation of the central bank in that area which was in tatters after the BBC scandal and the Tom Yam Kung crisis which was kicked off by the collapse of Finance One two weeks after the BOT gave it a clean bill of health following its annual audit.  They actually thought Finance One was such a fabulous example of a well run finance company that they had given it approval to acquire a small bank. 

 

What Tarisa was famous for before she ruined her own reputation was in standing up to the Thaksin regime which had busied itself looting Krung Thai Bank when she was head of financial supervision.  The Thaksinite finance ministry kept trying to get her to call off the dogs and threatening her but she never backed down and the CEO of KTB went to prison.  Thaksin's son narrowly avoided prison, despite what seemed on the surface to be a fairly open and shut case of receiving funds stolen from KTB and laundering them.  

Link containing quote sent

[Dogmatix]

3 hours ago, Mike Lister said:

Link containing quote sent

 

Thanks for the link but it doesn't support the statement that she was attacked by the government over monetary policy as governor.  On the contrary she was attacked by the private sector as governor for bowing under pressure from the government to introduce capital controls. For the rest of her time as governor she kept a low profile. 

[bigupandchill]

Would reducing the interst rate here also weaken the Baht? Retail banks in the UK are paying over 5%, so money would flow out of Thailand looking for a better return, weakening the currency.

[Mike Lister]

13 hours ago, Dogmatix said:

 

Thanks for the link but it doesn't support the statement that she was attacked by the government over monetary policy as governor.  On the contrary she was attacked by the private sector as governor for bowing under pressure from the government to introduce capital controls. For the rest of her time as governor she kept a low profile. 

Oh come on now, I mean really! You've been here long enough to remember this:

 

Tensions between the Thai government and the country’s central bank over monetary policy boiled over on Friday, with the new deputy finance minister calling for the bank’s governor to resign.

 

It seems the excerpt above is behind a paywall so  just google, "Tarisa Watanagase told to resign by deputy finance minister", and click on the FT link, it will let you read the article.

 

[smedly]

13 hours ago, Geoffggi said:

Maybe the PM should take a breath, step back & listen to the advice of professional bankers .........

and stop interfering in things that are none of his business 

 

seems to me the PM is trying to offload blame for low GDP growth on interest rate level 

[TroubleandGrumpy]

12 hours ago, Mike Lister said:

Oh come on now, I mean really! You've been here long enough to remember this:

 

Tensions between the Thai government and the country’s central bank over monetary policy boiled over on Friday, with the new deputy finance minister calling for the bank’s governor to resign.

 

https://www.ft.com/content/c280f560-656d-11dd-a352-0000779fd18c

Mike - please stop proving links to websites that are behind a paywall.

[Purdey]

Thailand's economy is s minefield. Lower the interest, personal debt increases. Raise the interest, NPLs go up. 

[Mike Lister]

6 minutes ago, TroubleandGrumpy said:

Mike - please stop proving links to websites that are behind a paywall.

Hmm, that's interesting, the article wasn't behind a paywall when I read it last night but now it is....I'll do some digging but thanks for letting me know.

[bamnutsak]

On 2/26/2024 at 8:39 AM, ikke1959 said:

Of course he want a lower interest rate..

 

As a real estate tycoon lower interest rates would be good for sales.

 

 

Credit Bureau sounds alarm over 610 billion baht in housing loans in default

 

https://www.thaipbsworld.com/credit-bureau-sounds-alarm-over-610-billion-baht-in-housing-loans-in-default/

 

 

Edited February 27 by bamnutsak

[Mike Lister]

14 minutes ago, TroubleandGrumpy said:

Mike - please stop proving links to websites that are behind a paywall.

Ok so here's the solution....obviously it wasn't behind a paywall when I first read it, otherwise I wouldn't have been able to cut and paste the excerpt that I posted!

 

If you click on the link you will be asked to take out a subscription. But, if you google, "Tarisa Watanagase told to resign by deputy finance minister", and click on the FT link, it will let you read the article. How amazing is that, magic or similar perhaps. 🙂

[Mike Lister]

The Cabinet has already approved borrowing of USD 560 bill but this is alleged to be for another purpose and not for the digital wallet scheme, which incidentally is the same amount! This means the Cabinet has now authorised the expense, all they have to do now is find the money. I suspect that approval of increased budget deficit will make things slightly easier to acquire funding. It could always be claimed that the money was needed for other purposes and then diverted at the last moment, because priorities changed! It looks like a legal minefield ahead if they go that route but who knows.

[Mike Lister]

12 hours ago, smedly said:

and stop interfering in things that are none of his business 

 

seems to me the PM is trying to offload blame for low GDP growth on interest rate level 

Yes indeed. And one key reason why GDP growth was down 0.6% in December was because the government with held disbursing the budget, the government actually caused that fall in growth.

[ikke1959]

5 hours ago, bamnutsak said:

 

As a real estate tycoon lower interest rates would be good for sales.

 

 

Credit Bureau sounds alarm over 610 billion baht in housing loans in default

 

https://www.thaipbsworld.com/credit-bureau-sounds-alarm-over-610-billion-baht-in-housing-loans-in-default/

 

 

Could be but the interest rate is not only for a country it follows the international rates too, and probably every country is following it.

[Dogmatix]

Thai interest rates the highest in 10 years but how come I am still getting only 0.5% on my saving account - the same at 10 years ago?

[Mike Lister]

3 minutes ago, Dogmatix said:

Thai interest rates the highest in 10 years but how come I am still getting only 0.5% on my saving account - the same at 10 years ago?

A few reasons. Bank savings rates are linked to the central bank rate which in Thailand currently is 2.5% Banks here are free to offer whatever rates they want and since there is outside competition from foreign retail banks, the public is at the mercy of a the families.