Thailand Raises Interest Rates To Curb Inflation

[webfact]

Thailand raises interest rates to curb inflation

BANGKOK, January 12, 2011 (AFP) - Thailand's central bank raised interest rates Wednesday for the fourth time in the past six months, citing the prospect of rising inflation and solid economic growth.

The Bank of Thailand increased the official cost of borrowing to 2.25 percent, up from 2.0 percent previously.

"Risks to global growth have declined," assistant governor Paiboon Kittisrikangwan said in a statement.

"The economy is expected to grow robustly in 2011," he predicted.

Domestic consumption and investment continued to be supported by rising income and employment, while inflationary pressures were expected to increase in future due to higher energy costs, Paiboon said.

Thailand's inflation accelerated to 3.0 percent in December as energy and food prices increased, data showed last week.

The central bank raised its key interest rate in July 2010 for the first time in almost two years as the economy recovered from the global financial crisis and the fallout from deadly political unrest in Bangkok.

Pichai Lertsupongkit, an analyst at Thanachart Securities, expects more hikes in the coming months.

"The central bank will gradually increase the rate this year." he said.

The Thai economy remained relatively resilient in the face of violence in Bangkok in April and May of last year and observers believe it remains on a broad recovery path, notwithstanding a recent soft patch.

The economy slipped back into technical recession with a second straight quarterly contraction in the three months to September of last year, hit by a strong baht and a slowdown in US and European economic growth.

-- (c) Copyright AFP 2011-01-12

[webfact]

POLICY RATE

MPC raises rate as expected

By Seetalavajit Sabayjai

The Nation

The Monetary Policy Committee today decided to raise the policy rate by 25 basis points to 2.2 per cent to contain the rising inflationary pressure.

This is also part of its rate normalisation policy, as real interest rate (the actual interest rate after inflation) remains in the negative territory.

"The pressure on headline and core inflation is expected to rise on higher demand. As rising production cost will rise, products prices could be raised," said Paiboon Kittisrikangwan, assistant governor of the Bank of Thailand.

The rate hike has been expected. Economic houses have expected the Bank of Thailand to raise the policy rate by 75-125 basis points throughout this year, due to higher inflationary pressure.

A central bank official earlier admitted that the inflation in December was higher than expected, as a result of higher commodity prices as well as food prices.

-- The Nation 2011-01-12

[jayjay0]

Will this affect the exchange rates and if so how?:jap:

[JimsKnight]

Normally it can have an effect of making a currency stronger with interest rises.

At least that's how I see it with the state of the £ against the baht...

[coma]

Normally it can have an effect of making a currency stronger with interest rises.

At least that's how I see it with the state of the £ against the baht...

I agree. Interest rate rises definately can have a strengthening effect on a currency if economist and currency traders hadn't already factored in the rate rise prior to the announcement. Will be an interesting day tomorrow watching the baht move against all the major currencies. That being said the Baht is already very strong against a load of majors so the change may be muted. Wait and see.

[astral]

Good news for those with their "retirement visa sum" in the bank?

[aznyron]

yesterday it was 30.34 to 1 USD today it below 30 29.94 I knew it would not last long I am glad I did exchange some USD yesterday the bankers are keeping the baht strong for there own wind fall profits greed has set in & the poor are suffering with loss of jobs in both tourist & exports so what you read in BKK post is all B/S lies about how well Thailand is doing

[Piengrudee]

Thailand raises interest rates to curb inflation. This only help the rich people; Eie, rich people get more interest from their saving to offset the price increase. But it is a double wham for poor people; pay more for goods, plus pay more interest on their loans.

[mccw]

Thailand raises interest rates to curb inflation. This only help the rich people; Eie, rich people get more interest from their saving to offset the price increase. But it is a double wham for poor people; pay more for goods, plus pay more interest on their loans.

well the therory is; in the west since almost everyone has some form of debt, so then raising interest rates does indeed lead to higher payments and less money to spend. the less money being spent and transversly less demand against supply results in lower pricings to attract consumption and hense a lower inflation rate; which is the stated goal of the rate hike and yep thats helping savers over borrowers. But then who's to say that those who work hard and save rather than spend on frivolous items shouldn't be rewarded and do better out of system, maybe the system would be more stable and sustainable with less incentive to incure debts.

But I'm not sure how well this interst rate change will work in thailand; or even so much anywhere in this new era of a globalised world where commodity prices and the facts of booming populations probably far out wiegh any minor tweekings of interest rates can counteract

[PaulHamon]

Thailand raises interest rates to curb inflation. This only help the rich people; Eie, rich people get more interest from their saving to offset the price increase. But it is a double wham for poor people; pay more for goods, plus pay more interest on their loans.

2.25% is still low, base rate in oz is... 4.75%

[Losangels]

Hope banks will start raising saving interest rates soon instead of just raising lending rates.

[bangkokburning]

Interest rates always influence currency. I have to laugh. Rice is already not exportable. Europeans have pretty much decided that this place is finished as a holiday destination...

I really don't know what other options BOT has - but it can't bode well for tourism and exports.

[Langsuan Man]

I can't wait for all the wringing of hands when the Thai pundits complain about the high baht and exports

What did they expect when they raise interest rates and make the Baht more attractive to foreign investors

[el jefe]

This rate hike was expected and has been priced into the exchange rate for a long time. It's expected that there will probably be another .25% increase in the next 2-3 months. What will surprise the markets is if it happens this month. Or if it doesn't happen by the end of Q1.