Bank Of Thailand's Monetary Policy Committee Unexpectedly Slashes Rate To 2.75%

[webfact]

POLICY RATE

MPC unexpectedly slashes rate to 2.75%

The Nation

BANGKOK: -- The Bank of Thailand's Monetary Policy Committee unexpectedly adopted the hawkish approach, with today's decision to cut the policy rate by 25 basis points to 2.75 per cent.

"The overall global economic outlook remained weak, although further monetary policy easing in major economies helped to support global financial market sentiment and latest indicators pointed towards some improvements in US housing and labour markets.

Weak global demand had weighed more heavily on Chinese and regional economies than expected. Going forward, a more moderate growth outlook for the Chinese economy could dampen Asian exports further. At the same time, fiscal risks in the US and practical implementation challenges to the resolution of euro debt crisis posed significant risks to the global economic outlook," said Paiboon Kittisrikangwan, assistant governor, Bank of Thailand.

The policy rate had stayed at 3 per cent since January.

The International Monetary Fund last week revised down global growth forecast to 3.3 percent in 2012 and 3.6 percent in 2013, down from 3.5 percent this year and 3.9 percent next year. New estimates suggest a 15 percent chance of recession in the United States next year, 25 percent in Japan and above 80 percent in the euro area.

The MPC furthered that the Thai economy continued to expand in the third quarter, although the impact of softer global demand on exports and export production had become more apparent. The MPC assessed that the global economy would gradually improve next year, but the substantial degree of uncertainty surrounding the outlook could hamper exports in the period ahead. Domestic spending and private investment outlays continued to be robust, though investment moderated as flood-related expenditures tapered off. Credit growth to the private sector remained high and warranted close monitoring, while inflationary pressure stabilised at an acceptable level.

With upside risk to inflation contained, the majority of MPC members deemed that monetary policy easing was warranted to shore up domestic demand in the period ahead and ward off the potential negative impact from the global economy, which remained weak and fragile.

Five of seven members of the MPC voted for the cut.

Two members voted to maintain the policy rate at 3 percent per annum deeming the current growth momentum to be adequate and that further policy action could await greater clarity in the economic outlook.

Most economists, local and foreign, expected the MPC to remain dovish by keeping the policy rate at 3 per cent, given easing inflation pressure in the past months.

They also agreed that 2 of the 7 MPC members would suggest a rate cut.

Kobsak Pootrakul, executive vice president of BBL, said that the rate is expected to stay unchanged as global conditions are relatively stabilised.

Benjarong Suwankiri, vice president of TMB’s macroprudential risk department, added that there was no further negative development in the euro zone while some economic indicators in the US showed improvement.

He expected the policy rate to stay at this level until the middle of next year. Then, in the second half, inflation pressure will pressure following the nationwide wage hike, higher oil prices and external factors. It is anticipated that the US and China should demonstrate signs of economic recovery in the latter half of next year.

-- The Nation 2012-10-17

[kblaze]

there is alot of scrambling going on in research/econ departments at the moment. this is akin to a preemptive strike on potential global deteriorations impact on TH. very surprising.

[webfact]

Bank of Thailand cuts rates as global economy slows

BANGKOK, Oct 17, 2012 (AFP) - Thailand's central bank cut interest rates for the first time in nine months Wednesday as it looks to support the country's manufacturing sector and fight the effects of a global slowdown.

The Bank of Thailand's surprise 25 basis point reduction to 2.75 percent is the first since January as the crucial industrial sector foundered following devastating floods just months before.

Assistant governor Paiboon Kittisrikangwan said the Bank's Monetary Policy Committee believed the move was warranted to boost domestic demand, with Thai inflationary pressures low and the world economy at "high risk".

"Overall, the Thai economy continued to expand in the third quarter of this year, but export and production for export are clearly affected by the global economy," he said in a statement.

Analysts from Capital Economics said that while the move came as a surprise a cut had been expected next month.

"A key reason is that the manufacturing sector's recovery from last year's floods has succumbed to weak global demand," said Asia economist Sukhy Ubhi.

He said while manufacturing output and exports both grew year-on-year in early 2012, they are "once more falling at around a double-digit pace".

"This bodes ill for Thailand, given that manufacturing accounts for around 40 percent of its economic output," he said, adding that there were "tentative signs that export weakness is feeding through to domestic demand".

Thailand's economy rebounded sharply after suffering a double-digit contraction in the wake of the kingdom's worst floods in decades, which swept across the country killing hundreds of people, deluging thousands of homes and disrupting global supply chains.

Gross domestic product rose 4.2 percent in the second quarter of 2012 compared with a year earlier, after a 0.3 percent increase in the first three months of this year.

Policymakers will meet again on November 28 for their last meeting of 2012.

-- (c) Copyright AFP 2012-10-17

[Rancid]

Well lets see, the criminal lapdog Fed slashed its rates long ago to zero help its bankster masters. This encourages debt and punishes savers to the degree they are forced into higher risk like bonds and HFT markets to even hope for a modest return, deadly for retires and the middle class, but hey good for banks. So now of course other countries with private criminal central banks are following suit, recently Australia and now Thailand. Dear of dear, what could it all mean?

[EvilDrSomkid]

If the policy rate is cut by 25 points, will the banks follow suit with the MLR currently at 7.125?

[meatboy]

now lets see what the banks do now,mortgage rates unchanged saving rates slashed by 25basic points you bet.

[yoshiwara]

Well lets see, the criminal lapdog Fed slashed its rates long ago to zero help its bankster masters. This encourages debt and punishes savers to the degree they are forced into higher risk like bonds and HFT markets to even hope for a modest return, deadly for retires and the middle class, but hey good for banks. So now of course other countries with private criminal central banks are following suit, recently Australia and now Thailand. Dear of dear, what could it all mean?

Clearly you don't know.

[Naam]

oh dear

[Lite Beer]

POLICY RATE

HSBC expects another 25-bps rate cut

The Nation

BANGKOK: -- The Bank of Thailand's Monetary Policy Committee is expected to announce another 25-basis points cut in the policy rate to 2.50 per cent in the next one or two meetings, said HSBC economist.

Su Sian Lim said in a research note that despite the cut, the scope for rate hikes remains in 2013 in line with the global recovery. This will now likely begin in the latter half of 2013. Such would see the BOT policy rate being lifted back up to 3 per cent by the end of third quarter.

She admitted that yesterday’s decision to cut the rate to 2.75 per cent was a big surprise to the market as 20 out of 23 economists had expected no change.

"Going forward, we do not see strong fundamental arguments for the BOT to pursue a string of rate cuts, even as the central bank lowers its 5 per cent growth forecast for 2013. At most one more rate cut lies in store, either at the November or January meeting," she said.

The decision was surprising on a number of counts, she said. First, external outlook was more constructive when the MPC met on Sept 5, particularly with the US and Europe now ramping up their monetary policy responses. Indeed, even Singapore, an economy that is significantly more externally driven than Thailand and whose growth numbers are looking much worse, made the decision last week to maintain its tightening policy.

On the contrary, the BOT seemed more concerned with the developments in Europe and the US this time round. The language in September had been more prosaic, painting the economic recovery in the US as "tepid", and projecting further weakening

in the eurozone in the second half. On Asia, the tone was generally unchanged. The BOT continued to express some disappointment at Chinese and Asian growth. This does not seem to be a significant deviation from September's comment that the impact of slower global growth on Chinese and Asian economies had become "more apparent."

More significantly, the decision to cut the policy rate was surprising because it comes amid consistent guidance from the central bank that further policy accommodation was not needed. As recently as October 14, Governor Prasarn told Bloomberg that "we don’t see necessity at the moment to use monetary policy to restore confidence because the market is already quite confident... exports are coming down but domestic demand is still very strong to compensate."

That last part of Prasarn's comment is most certainly true. Despite nascent signs that consumption and investment are normalising post-floods, none of this moderation can be termed as alarming.

’Given Prasarn's recent guidance, and what is obviously still a robust level of domestic activity, questions over political interference - and in turn, the central bank's credibility - will naturally arise. In the past few months, we know that BOT Chairman Virabongsa (Ramangkura) and Finance Minister Kittiratt (Na-Ranong) have both publicly and

repeatedly pressed the case for rate cuts. Virabongsa has argued that growth needs to be supported; additionally, a lower policy rate would stem foreign capital inflows into the Kingdom, in turn slowing the baht's appreciation and helping to bolster the weakening export sector," she noted.

To handle with inflows, regulations will be eased in five areas, including a lifting of the US$100 million cap on direct overseas investment by individual Thai investors, as well as unlimited portfolio investment by Thai funds, from an annual cap of $50 million currently.

The economist noted that Europe and the US are looking better than they were six weeks ago when the BOT last met. Both the US and European central banks are now committed to more significant policy action. US growth next year will no doubt slow on account of a significant unwinding of tax benefits and so on, but our US economists believe that political compromise should help the economy avert a full-blown "fiscal cliff".

The US economy should still expand in 2013, albeit by a sub-par 1.7 per cent, from a likely 2.2 per cent this year. Meanwhile, the Eurozone should contract 0.1 per cent, following a 0.6 per cent drop in growth this year.

While the central bank projects 5 per cent economic growth for 2013, HSBC predicts a 4.5 per cent growth rate.

"To this end we believe that at most one me more rate cut lies in store, either at the November 28 meeting, or the one in January 2013. Although we do not see a strong fundamental case for rate cuts, the 5-2 vote in favour of easing today represents quite a large split. It looks unlikely that this split will narrow significantly in the near-term. Further out, however, the scope for rate cuts will likely be limited by concerns over credit growth."

-- The Nation 2012-10-18

[Lite Beer]

INTEREST RATE

Banks reluctant to cut lending/deposit rates

The Nation

BANGKOK: -- Commercial banks perceive the Bank of Thailand's policy rate cut on Wednesday as a sign of worries over external factors, not the pressure for a cut in lending and deposit rates.

"The BOT’s signal is not for lending/deposit rate cut, but indicative of concerns in the global economy," said Kittiya Todhanakasem, a senior executive vice president of Krung Thai Bank.

"Commercial banks can cut rates accordingly, when the time is right. There’s no need for immediate response. As the move will cover both lending and deposit rates, it will affect both depositors and borrowers. It’s difficult to lower deposit rates in light of loan growth, with substantial need for funding," she said.

Kasikorn Research Centre also foresees greater competition for deposits, particularly in the last quarter of this year when some deposits would flow to the insurance and mutual fund industries. The fierce competition will continue if loan growth continues at this pace.

The research house also commented that the Bank of Thailand’s rate policy will be tied with domestic and external factors. Externally, the US fiscal cliff, the euro zone crisis and the hard landing in China would be in the picture. Internally, the momentum of domestic consumption and investment will depend on the government’s public investment.

-- The Nation 2012-10-18

[Naam]

an interesting fact is that the Baht did not lose a single Satang vs. the "benchmark" USD.

[belg]

wait... thailand shot themselves again in the foot by thinking they can control the rice supply, used many hundreds of taxpayers billions to scheme this all, and now they do this ? loooooooooooooooooooool

[Naam]

wait... thailand shot themselves again in the foot by thinking they can control the rice supply, used many hundreds of taxpayers billions to scheme this all, and now they do this ? loooooooooooooooooooool

what has rice supply to do with the Bank of Thailand's policy rate cut? and why should that be a shot in the foot?

[farang000999]

does the BOT publish household/consumer/credit card debt statistics?

[farang000999]

October 2, 2012 1:00 am

The Bank of Thailand is pondering measures to prevent runaway household debt from threatening economic stability.

"The central bank will pay more attention to the surge in household debt, as it has gone up to 40-50 per cent of household income from 30 per cent previously," Deputy Governor Krirk Vanikkul said yesterday.

This debt burden does not include underground borrowing.

http://www.nationmultimedia.com/business/BOT-looks-at-ways-to-control-household-debt-30191482.html

Edited October 18, 2012 by metisdead
: Edited per fair use policy and supporting link added.

[farang000999]

Thailand's central bank cut interest rates for the first time in nine months Wednesday as it looks to support the country's manufacturing sector and fight the effects of a global slowdown.

The Bank of Thailand's surprise 25 basis point reduction to 2.75 percent is the first since January as the crucial industrial sector foundered following devastating floods just months before.

Assistant governor Paiboon Kittisrikangwan said the Bank's Monetary Policy Committee believed the move was warranted to boost domestic demand, with Thai inflationary pressures low and the world economy at "high risk".

[chiang mai]

Thailand's central bank cut interest rates for the first time in nine months Wednesday as it looks to support the country's manufacturing sector and fight the effects of a global slowdown.

The Bank of Thailand's surprise 25 basis point reduction to 2.75 percent is the first since January as the crucial industrial sector foundered following devastating floods just months before.

Assistant governor Paiboon Kittisrikangwan said the Bank's Monetary Policy Committee believed the move was warranted to boost domestic demand, with Thai inflationary pressures low and the world economy at "high risk".

Afraid you'll have to spell out the joke, I must be too dense to see it.

[chiang mai]

wait... thailand shot themselves again in the foot by thinking they can control the rice supply, used many hundreds of taxpayers billions to scheme this all, and now they do this ? loooooooooooooooooooool

Care to explain?

[market trader]

does the BOT publish household/consumer/credit card debt statistics?

In view of the fact that 90% of Thais don't have a credit card publishing statistics would be a waste of paper.

[EvilDrSomkid]

INTEREST RATE

Banks reluctant to cut lending/deposit rates

The Nation

BANGKOK: -- Commercial banks perceive the Bank of Thailand's policy rate cut on Wednesday as a sign of worries over external factors, not the pressure for a cut in lending and deposit rates.

"The BOT’s signal is not for lending/deposit rate cut, but indicative of concerns in the global economy," said Kittiya Todhanakasem, a senior executive vice president of Krung Thai Bank.

"Commercial banks can cut rates accordingly, when the time is right. There’s no need for immediate response. As the move will cover both lending and deposit rates, it will affect both depositors and borrowers. It’s difficult to lower deposit rates in light of loan growth, with substantial need for funding," she said.

Kasikorn Research Centre also foresees greater competition for deposits, particularly in the last quarter of this year when some deposits would flow to the insurance and mutual fund industries. The fierce competition will continue if loan growth continues at this pace.

The research house also commented that the Bank of Thailand’s rate policy will be tied with domestic and external factors. Externally, the US fiscal cliff, the euro zone crisis and the hard landing in China would be in the picture. Internally, the momentum of domestic consumption and investment will depend on the government’s public investment.

-- The Nation 2012-10-18

I guess this answers my previous question. No, MLR will not be cut.

[chiang mai]

does the BOT publish household/consumer/credit card debt statistics?

In view of the fact that 90% of Thais don't have a credit card publishing statistics would be a waste of paper.

Where do you get the figure of 90% from and do you think that credit card debt is the only thing that's important to understand?

[khunken]

This is what the government has been pushing the BOT to do, having a so-called economic 'guru' installed as president of the bank's board.

It's probably an effort to weaken the Baht - in the near future - so the losses on international rice sales is lessened. Still, it'll suit ex-pats transferring money into the country.

[Naam]

wait... thailand shot themselves again in the foot by thinking they can control the rice supply, used many hundreds of taxpayers billions to scheme this all, and now they do this ? loooooooooooooooooooool

Care to explain?

you don't expect an explanation, do you?

[chiang mai]

wait... thailand shot themselves again in the foot by thinking they can control the rice supply, used many hundreds of taxpayers billions to scheme this all, and now they do this ? loooooooooooooooooooool

Care to explain?

you don't expect an explanation, do you?

Of course not, it's just another example of a fly by poster who writes nonesence and then disappears, I dispair because there will be some who will believe what he wrote.

[farang000999]

Thailand's central bank cut interest rates for the first time in nine months Wednesday as it looks to support the country's manufacturing sector and fight the effects of a global slowdown.

The Bank of Thailand's surprise 25 basis point reduction to 2.75 percent is the first since January as the crucial industrial sector foundered following devastating floods just months before.

Assistant governor Paiboon Kittisrikangwan said the Bank's Monetary Policy Committee believed the move was warranted to boost domestic demand, with Thai inflationary pressures low and the world economy at "high risk".

Afraid you'll have to spell out the joke, I must be too dense to see it.

if you are concerned about household debt why would you lower interest rates when the global economy appears relatively stable? lower interest rates will just encourage more borrowing and consumption. oops, nevermind, apparently they are going to crack down on creditors trying to take advantage of potential debtors? <deleted>?

[chiang mai]

Thailand's central bank cut interest rates for the first time in nine months Wednesday as it looks to support the country's manufacturing sector and fight the effects of a global slowdown.

The Bank of Thailand's surprise 25 basis point reduction to 2.75 percent is the first since January as the crucial industrial sector foundered following devastating floods just months before.

Assistant governor Paiboon Kittisrikangwan said the Bank's Monetary Policy Committee believed the move was warranted to boost domestic demand, with Thai inflationary pressures low and the world economy at "high risk".

Afraid you'll have to spell out the joke, I must be too dense to see it.

if you are concerned about household debt why would you lower interest rates when the global economy appears relatively stable? lower interest rates will just encourage more borrowing and consumption. oops, nevermind, apparently they are going to crack down on creditors trying to take advantage of potential debtors? <deleted>?

Who says the global economy is relatively stable, China growth is slowing, the EU is as bigger mess than ever and the US faces its fiscal cliff, prudent I reckon to perhaps take a quarter point cut as an insurance policy against future growth (being the priority over household debt for the moment).

[EvilDrSomkid]

A better indicator of too high of a household debt here is, IMO, forfeiture on mortgages.

[khaowong1]

I am only making this statement comparing what I have seen with what's happening in the US, when ever the central banks make a move, up or down, it always seems to made with someone making a pot of money off these moves. Bankers usually don't do anything that doesn't involve making a profit. It happens, but not often.

[chiang mai]

Interesting that THB actually strengthened a few satang this morning following yesterdays anouncement of a rate cut, normally you'd expect the opposite. It's as though the markets have completely ignored the rate cut and it's business as usual.

[Naam]

Interesting that THB actually strengthened a few satang this morning following yesterdays anouncement of a rate cut, normally you'd expect the opposite. It's as though the markets have completely ignored the rate cut and it's business as usual.

i see the Baht losing 5 Satang (TT rate 30.55 vs 30.50) because of a slight Dollar strengthening vs. most major currencies.