Thailand's Interest Rate Possible To Maintain At 2.75%: U T C C

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Thailand’s interest rate possible to maintain at 2.75%: UTCC
By Digital Media



BANGKOK, May 25 – Thailand’s policy interest rate should remain at 2.75 per cent, which is still below the 3 per cent inflation, according to a leading academic.

Tanawat Polvichai, director of the economic research centre of the University of Thai Chamber of Commerce, said an interest reduction could possibly deter savings among people who may switch to riskier investment in the stock and property markets.

He said the gross domestic product (GDP) growth projection of 5.3 per cent, recently announced by the National Economic and Social Development Board (NESDB), was slightly lower than forecasted but remains higher than 5 per cent.

The Monetary Policy Committee (MPC) is scheduled to meet next Wednesday amid pressure for a lowered interest rate.

Mr Tanawat, however, said pressure on the MPC has slightly subsided with the baht weakening from Bt28.50 against the dollar last month to Bt29.50 against the dollar and the central bank’s efficiency in stabilising the Thai currency movement.

He said reducing the interest rate by 0.25 per cent, if decided by the MPC, could help stimulate the country’s economy and exports.

Chao Kengchon, managing director of Kasikorn Thai Research Centre, said the baht has gradually depreciated and foreign capital inflows decelerated though the MPC has not made any decision on the interest rate.

He said the most significant impact on the baht is from the US Federal Reserve’s quantitative easing (QE) which strengthens the US dollar, if implemented.

Asia’s stock markets and bonds will become less attractive as the dollar surges, resulting in capital outflow back to the US and depreciating baht.

Mr Chao said the Kasikorn Thai Research Centre will maintain its forecast of Thailand’s GDP growth at 4.8 per cent and exports at 7 per cent with optimism that the country’s economic situation will improve in the second half of this year.

Investments in the government’s Bt2 trillion infrastructure development will contribute to the country’s economic growth in the fourth quarter, he said. (MCOT online news)


-- TNA 2013-05-25

[JetsetBkk]

Thailands policy interest rate should remain at 2.75 per cent

Is the "policy interest rate" different from the actual interest rate?

[JeffAstle]

The policy rate is the rate set by the central bank which determines the rate it lends and takes money from the commercial banks at, and therefore,in theory, guides the rates set by the banks, the rates on bonds and so on. It pushes it up and down depending on economic and financial conditions - broadly, up when the economy and inflation are growing, down when the economy is weaker and inflation is not such a problem.

[frankold]

QE strengthens the dollar?

[JeffAstle]

Rather the other way round -- all those dollars have flooded this way and pushed up the baht. And all those yen are having the same effect. So the dollar and yen have gone down because of the QE in those countries. Not an exact science though. And don't ask me why the euro should be so strong, overall ...

[12DrinkMore]

Rather the other way round -- all those dollars have flooded this way and pushed up the baht. And all those yen are having the same effect. So the dollar and yen have gone down because of the QE in those countries. Not an exact science though. And don't ask me why the euro should be so strong, overall ...

Ze Germans are working hard and Merkel is holding the fort.

[drdoom6996]

The higher the Baht is the less Baht it takes to buy dollars in all the PTP politicians banks accounts in Europe. Pretty simple economics really. But what about the Thai people, you say? @% 'em, might be heard from the BOT.

[BahBahBoBo]

The higher the Baht is the less Baht it takes to buy dollars in all the PTP politicians banks accounts in Europe. Pretty simple economics really. But what about the Thai people, you say? @% 'em, might be heard from the BOT.

Actually, its not the Bhat getting stronger, but the Western currencies getting weaker, do more cross-referencing of all world currencies over a ten year history and it becomes very apparent. When i stopped my extensive world travels back in 2003 and stayed in Europe Within months i could see that the Western economies, property prices, wage levells etc were unsustainable and had been riding on the backs of the developing world for decades. I had also seen through those extensive travels the growth in these 'developing countries' and all the bright young minds there. I was telling people in 2003 that there would be a property crash but it fell on deaf ears. I also explained to people the current situation was not going to continue, too many smart young minds know the games the west have been playing, and that there wouyld have to be a (morally rightful) equalization. It is just plain old not fair that a farmer feeding the world is earning 200 dollars a month while a 'brainless layabout' is earning 250 a week at McDonalds. What you are seeing now is all engineered, nothing has happened by accident or without warning/indicators as they would have you believe. My advice, if you plan on staying in thailand and keep most of your funds in the west, is to transfer as much as you can feeling comfortable into Thai baht and keep a small saftey buffer in Swiss francs or even Norwegian kroners, probably two of the more stable western currencies at the moment in relation to world currencies. There is NO upward trend of Thai baht, it is a DOWNWARD trend of western currencies that WILL continue. Western big-wigs WANT their labourers paid cheaper and there products more competitive on the international market. They will screw their own people, don't you worry about that.

[bangkokburning]

Lowering = larger and more bubbles

Raising = stronger baht

Your move Thailand.

[reflectionx]

Mr Tanawat, however, said pressure on the MPC has slightly subsided with the baht weakening from Bt28.50 against the dollar last month to Bt29.50 against the dollar and the central bank’s efficiency in stabilising the Thai currency movement

Yes, but that is mostly due to the fact the BenDollar moved up against all the other currencies. So if we look at the big picture US$, GBP, YEN, EUR, AUS, which accounts for the major trading partners, the baht is still way up.

It was a crazy ride last week due to Ben's snafu, but I think the BenDollar will pull back as markets calm down. BoT does need to cut the rate, albeit a quarter, to send clear message.

On a side note, I am curious to see what are all the FINANCIAL EXPERTS in this forum who claimed that high baht is good for Thailand have to say now?

[NeverSure]

Thailand is stuck. The baht isn't important on a global scale. It's important in Thailand only.

The Thai government is running big deficits and borrowing. They also have grand plans to borrow for infrastructure including that high speed rail system.

Thailand's credit rating sucks (BBB-) and they have to pay a higher interest rate to attract bond buyers. They are also trying hard to attract investment money while they make it almost impossible to do biz in Thailand. So if they lower interest rates they won't be able to sell their bonds. If they don't the baht will stay high and hurt exports and therefore the economy.

Already right now they know their income is dropping from (tax income on) a slowing economy, mostly exports including the total loss of rice sales. They will need to borrow even more money.

As bangkokburning said, "Your move, Thailand." (I'm not implying that he agrees with me on anything, but I agree with him on that statement.)

[Naam]

Thailand has to pay a high interest rate because it isn't safe.

Thai interest rates are identical with those of Australia. obviously Oz is also

a country which "isn't safe"

[metisdead]

Off topic posts and replies have been removed.

[NeverSure]

Thailand has to pay a high interest rate because it isn't safe.

Thai interest rates are identical with those of Australia. obviously Oz is also

a country which "isn't safe"

Oz also has to pay high interest rates to fund its deficits. Australia is in a world of hurts just like Thailand and for much the same reasons. Costs in Australia are sky high and it's one of the most expensive places in the world. The people have been riding a bubble.

Ford Motor just announced that it would pull all manufacturing jobs out of Australia, after almost 90 years of being there. It also announced that it would increase production in the US. Link

I fully expect some auto manufacturers to pull out of Thailand. Thailand makes it incredibly hard to do business, with even international companies subject to the whim of corruption when they import materials. Thailand pays a bonus for duties collected to its people who run that.

Add to that the other business obstacles in Thailand and the new minimum wage, and Thailand no longer looks attractive.

Soon the cracks in the Chinese economy will no longer be able to be hidden, and we'll see that they are going backwards despite their claims to the contrary. Soon Thailand has to deal with its mounting debt and loss of income from exports due to its high baht and rice scheme.

[bangkokburning]

Thailand is stuck. The baht isn't important on a global scale. It's important in Thailand only.

The Thai government is running big deficits and borrowing. They also have grand plans to borrow for infrastructure including that high speed rail system.

Thailand's credit rating sucks (BBB-) and they have to pay a higher interest rate to attract bond buyers. They are also trying hard to attract investment money while they make it almost impossible to do biz in Thailand. So if they lower interest rates they won't be able to sell their bonds. If they don't the baht will stay high and hurt exports and therefore the economy.

Already right now they know their income is dropping from (tax income on) a slowing economy, mostly exports including the total loss of rice sales. They will need to borrow even more money.

As bangkokburning said, "Your move, Thailand." (I'm not implying that he agrees with me on anything, but I agree with him on that statement.)

Pretty much agree with your general analysis. Thailand is meaningless on world stage. Both the baht and the SET are never shown in data graphs ehen discussing world finance or even regional Asian finance. We attach importance to Thailand because we live here. We also see a vibrant economy, especially important while much of the world is in a quite a dilemma.

Certain sectors doing well and will continue. Others are pretty maxxed out.

What is interesting is that the bank is looking to lower the rate which implies it is less concerned with bubblrs than it is with strong baht and lagging exports. Poor export showing in export driven economy is a death knell and Thailand should have woken up to yhis long, long ago. GDP has fallen 20% from 6+ to 5% - a stunning fail.

25 basis points isnt going to do dick. It shows what a bind they are in.

So we will.see bubbles in many areas. Especially condos. Cheap money + falling commodities prices as world is in recession.

Maybe inflation when the world is in.deflation.I note price increases on many items as of late.

As for the bonds, they are junk - literally by definition. Only serious investors are Japanese to infrastructure and their economy is due to implode any day now.

[kblaze]

I dont think they should cut the rate. Fundamentals are sound, exports came out better than expected last month and the baht is nowhere near the 28.50 from earlier in the year. reminds me of the old saying "if it aint broke why fix it?"

Seems to me that PT fears that its voter-base (rice farmers) is going to get real angry if this rice scheme kills their business off by having rice millers/exporters (the people the farmers sell to) lose the bulk of their international clients. So pressure Prasarn and BoT to cut the rate, baht loses strength, rice becomes a bit easier (read cheaper) to sell.