Thai Central Bank May Keep Rate Unchanged As Inflation Quickens

[LaoPo]

Thai Central Bank May Keep Rate Unchanged as Inflation Quickens

By Suttinee Yuvejwattana and Michael Munoz

Jan. 15 (Bloomberg) -- Thailand's central bank may keep its benchmark interest rate unchanged as inflation accelerates and policy makers gauge the strength of a recovery in consumer spending after an election in December.

The Bank of Thailand will hold its one-day bond repurchase rate at 3.25 percent, according to all 19 economists surveyed by Bloomberg News. The decision is scheduled for 2:30 p.m. tomorrow in Bangkok.

``The fragility of domestic demand remains a key concern for the Bank of Thailand,'' said Usara Wilaipich, a senior economist at Standard Chartered Bank in Bangkok. ``The risks to growth are skewed to the downside given the potential for a significant slowdown in the U.S. economy.''

Thailand's inflation was the highest in a year in December as surging oil prices fanned prices of food and fuel. Consumer confidence rose in the last two months of 2007 from close to a six-year low on hopes that a new government will increase spending and boost economic growth, which has been driven by exports since a military coup in September 2006.

Central bankers in Europe and England kept borrowing costs unchanged last week to quell inflation even as global economic growth slows. Indonesian and South Korean central banks also kept their rates on hold amid oil prices close to a record $100 a barrel.

Goldman Sachs Group Inc. yesterday cut its growth forecasts for Asia, including Thailand, on concern an expected recession in the U.S. will erode demand for the region's exports.

Inflation, Baht

Thailand's consumer price index rose 3.2 percent in December from a year earlier, the Commerce Ministry said Jan. 2. Any quickening may be cooled by gains in the baht, which last week touched the highest per dollar since 1997 after the central bank indicated it may be inclined to let the currency gain.

``The central bank may allow the baht to appreciate as this may be the best compromise'' to damp inflation, said Vishnu Varathan, an economist at Forecast Pte. in Singapore. ``Interest rates cannot afford to come under the knife. Raising rates at this juncture may be a drag on investment and consumption.''

A new Thai government is due to take office by Jan. 22 after December's election. The People's Power Party, which won the most seats, has pledged to continue the policies of ousted Prime Minister Thaksin Shinawatra, who oversaw the fastest economic growth in a decade. Still, the party faces legal challenges to the election results before its win is endorsed.

`Rates May Be Cut'

``Continued political uncertainty and risks that export growth could slow with softening global demand suggest the central bank will stay on hold,'' said Frederic Neumann, an economist at HSBC in Hong Kong. ``Officials may indeed decide later in the year to cut interest rates further should evidence build that the Thai economy will slow markedly.''

Thailand had the slowest economic expansion of the six largest Southeast Asian nations in the third quarter. Growth may be 4 percent in 2008, Goldman predicted yesterday, cutting its estimate from 4.5 percent. Expansion was at least 4.5 percent last year, Finance Minister Chalongphob Sussangkarn said Dec. 7.

The Bank of Thailand lowered rates five times in the first seven months of last year to revive domestic consumption.

The following is a table of economists' estimates of where the central bank's one-day bond repurchase rate will be after the Jan. 16 policy meeting and at the end of this year. Figures are in percentages.

Thailand Benchmark Interest Rate

-------------------------------------------------

Jan 16 Feb 27 End of

Firm 2008

-------------------------------------------------

Median 3.25% 3.25% 3.25%

% Estimates at Median 100% 100% 46%

High 3.25% 3.25% 4.50%

Low 3.25% 3.25% 2.75%

Number of Estimates 19 14 13

-------------------------------------------------

ATR-Kim Eng Capital 3.25% 3.25% 3.25%

Bank of America 3.25% 3.25% 4.50%

Capital Economics Ltd. 3.25% -- --

Capital Nomura Securities 3.25% 3.25% 3.25%

Citi 3.25% -- --

Credit Suisse 3.25% 3.25% 3.25%

DBS Group 3.25% 3.25% --

Forecast Singapore 3.25% 3.25% 3.25%

HSBC 3.25% 3.25% 3.25%

ING Groep NV 3.25% -- --

Kasikorn Research 3.25% 3.25% 3.75%

Macquarie Securities 3.25% 3.25% 3.50%

Morgan Stanley 3.25% -- --

Phatra Securities 3.25% 3.25% 3.25%

Standard Chartered Bank 3.25% 3.25% 2.75%

Thomson IFR 3.25% -- --

Tisco Securities 3.25% 3.25% 3.50%

UOB Group 3.25% 3.25% 3.50%

Westpac Banking Corp 3.25% 3.25% 3.75%

-------------------------------------------------

Note:

The table, above, is better readable here:

http://www.bloomberg.com/apps/news?pid=206...p;refer=economy

LaoPo

[makavelithedon]

Hmmm 3 ish percent base rate. It's been a few months since I looked but the bog standard high street bank mortgage rate was around twice that?

Unbelievable what the average Thai here gets ripped on.

Edited January 18, 2008 by makavelithedon