Bank Of Thailand Cuts Policy Interest Rate By 0.25% To 2.50%

[webfact]

ECONOMY
Policy rate cut by 25bps
The Nation



BANGKOK: -- The Bank of Thailand's Monetary Policy Committee on Wednesday voted unanimously to reduce the policy rate by 25 basis points to 2.5 per cent, on the back of lower-than-expected economic data in the first quarter.

"The MPC will closely monitor developments of the Thai economy, financial stability risks as well as capital flow situation, and stand ready to take appropriate action as warranted," said Paiboon Kittisrikangwan, secretary of the MPC.

The last interest rate cut took place in October 2012. The decision today takes effect immediately.

It followed

Thirteen out of 22 econmists surveyed by Bloomberg expected the rate cut. Most economists agreed that the slowing growth in the first quarter justifies the rate cut and this should not hurt the central bank’s credibility.

Following is the statement from the MPC.

The global economic recovery was slower than expected. The US economy continued to recover gradually. The eurozone economy remained weak, but tail risks have declined. The Chinese and Asian economies expanded less than expected, which may cause a delay in Thai exports' recovery. Meanwhile, the Japanese economy began to benefit from economic stimulus policies, as reflected by improvement in exports and private consumption. Global financial market remained volatile, leading to persistent capital flows into the region and exchange rate volatility.

The Thai economy in the first quarter of this year grew less than expected from tepid domestic demand, which could weigh on overall economic momentum particularly if there was delay in government's infrastructure investment expected to start later this year.

Exports are subject to downside risks from growth moderation in regional economies, especially China. Inflationary pressure eased further owing to lower production costs, while growth of private credit and household debts remained elevated.

The committee judges that the Thai economy should continue to expand on the back of sound economic fundamentals, although downside risks have increased from lower-than-expected growth in the first quarter of this year. As inflation remains well within the target, monetary policy has room to further cushion against downside risks to domestic demand.

Against the backdrop of continued financial stability concerns, the MPC thus voted unanimously to reduce the policy rate by 0.25 per cent from 2.75 to 2.50 per cent per annum, with immediate effect.


-- The Nation 2013-05-29

[reflectionx]

Told you so ... It's all about sending the message

Edited May 29, 2013 by reflectionx

[waza]

In a gallant display of political independence the Monetary Policy Committee has decided to decrease the Thai interest rates for the good of all Thais, as Thaksin demanded. They have indicated that the rationale was the lower-than-expected economic data in the first quarter which has caused less growth than expected, tepid domestic demand and fermented the growth of private credit and household debts. This situation is no way is a reflection of Thai government populist policies but the result of poor economic policies of US and Europe. The Monetary Policy Committee stated this change was not due to the constant public and private pressure by Thaksin and his henchmen to force the BOT to do as they demand but for a concern for all Thais.

This rate change and other government interventions may have the effect of lowering the exchange rate of the Thai baht and increasing imports such as fuel and electronics stimulating further inflation but countered by pointing out the lower interest rate will make debt cheaper and therefore increase overall GDP.

Edited May 29, 2013 by waza

[Eesat]

[chiang mai]

Or it could just be that the MPC simply did the job it was supposed to do, they looked at the evidence and concluded that the rate needed to be cut by a quarter of a percent!

And if we really must bring Thaksin into the discussion then perhaps he, being a fairly smart kinda guy, also looked at the evidence on the economy and arrived at the same answer that almost everyone else did, that being that the bank rate needed to be cut and he thought to himself, I can make political capital out of this by insisting publically that the MPC cut the rate, that way, when they do cut it, it will look (to some people) that they did so because I demanded it!!!

Personally, I favour the first option, despite the fact there is no associated conspiracy theory, but hey, you can't have everything.

[Eesat]

I don't really bother following exotics like the Baht but Bloomberg's are quoting a 4-month low for the Baht,surely that can't be right? :

http://www.bloomberg.com/news/2013-05-29/thai-baht-weakens-to-four-month-low-as-interest-rate-cut-seen.html

[Eesat]

In a gallant display of political independence the Monetary Policy Committee has decided to decrease the Thai interest rates for the good of all Thais, as Thaksin demanded. They have indicated that the rationale was the lower-than-expected economic data in the first quarter which has caused less growth than expected, tepid domestic demand and fermented the growth of private credit and household debts. This situation is no way is a reflection of Thai government populist policies but the result of poor economic policies of US and Europe. The Monetary Policy Committee stated this change was not due to the constant public and private pressure by Thaksin and his henchmen to force the BOT to do as they demand but for a concern for all Thais.

This rate change and other government interventions may have the effect of lowering the exchange rate of the Thai baht and increasing imports such as fuel and electronics stimulating further inflation but countered by pointing out the lower interest rate will make debt cheaper and therefore increase overall GDP.

How utterly ridiculous,it's nothing to do with Thaksin.A rate cut has been on the cards for many,many months now,it's not exactly rocket science is it as your rice mountain piles up?

Edited May 29, 2013 by Eesat

[waza]

In a gallant display of political independence the Monetary Policy Committee has decided to decrease the Thai interest rates for the good of all Thais, as Thaksin demanded. They have indicated that the rationale was the lower-than-expected economic data in the first quarter which has caused less growth than expected, tepid domestic demand and fermented the growth of private credit and household debts. This situation is no way is a reflection of Thai government populist policies but the result of poor economic policies of US and Europe. The Monetary Policy Committee stated this change was not due to the constant public and private pressure by Thaksin and his henchmen to force the BOT to do as they demand but for a concern for all Thais.

This rate change and other government interventions may have the effect of lowering the exchange rate of the Thai baht and increasing imports such as fuel and electronics stimulating further inflation but countered by pointing out the lower interest rate will make debt cheaper and therefore increase overall GDP.

How utterly ridiculous,it's nothing to do with Thaksin.A rate cut has been on the cards for many,many months now,it's not exactly rocket science is it as your rice mountain piles up?

Do you have dyslexia? That what I wrote

[webfact]

Thailand trims interest rate as economy cools

BANGKOK, May 29, 2013 (AFP) - Thailand on Wednesday cut its benchmark interest rate by 0.25 percentage points, the first reduction in seven months, after the domestic economy contracted in the first quarter of the year.

Sluggish economic growth in China, the United States and the European Union is weighing on the Thai economy, the central bank said as it reduced its policy rate to 2.50 percent.

"Exports are likely to face downside risks because of slow growth in China while inflationary pressure has eased," the Bank of Thailand said in a statement.

The Bank had faced pressure from the government and the business community to lower interest rates to slow capital inflows and help weaken the Thai baht, whose rise has made Thai exports less competitive.

Thailand's economy shrank 2.2 percent in the three months to March from the previous quarter -- the first contraction in more than a year -- as manufacturing output fell, official data showed last week.

On a year-on-year basis, GDP growth slowed to 5.3 percent.

The unexpectedly weak performance followed a strong year-long recovery from devastating floods in late 2011 that hit major factories and caused a double-digit drop in gross domestic product (GDP).

Policymakers expect the Thai economy to bounce back from the latest weak patch and "expand throughout the year due to sound economic fundamentals", the central bank said.

Analysts said the central bank was likely to keep the current policy in the coming months to see how the economy performs.

"The Bank will maintain the policy rate at 2.5 percent throughout the second half of this year and take a wait-and-see attitude," said Usara Wilaipich, senior economist at Standard Chartered Bank.

-- (c) Copyright AFP 2013-05-29

[Sandman77]

What must happen in Thailand that the interest rates also go down under 1 procent like in the eu?

How many billion Thailand borrow from other country's?

I never read about this!

[Khun Jean]

So what happens after following this path for a while. 0% interest?

Race to the bottom, the survival of the weakest.

What happened to making your currency strong, so that energy and commodities imports are cheaper so that overall costs of manufacturing and farming goes lower and increase quality of products, etc..

I think this whole current generation of leaders everywhere are completely out of their minds. All schooled the same in keynesian economics.

There is only one goal, and that is get out of debt, and make your currency strong. All else will burden future generations. Upside down world where debt is good and weakness is preferred.

[AnotherOneAmerican]

What does this do to the MRR?

[reflectionx]

What does this do to the MRR?

In normal countries - prime goes down. In Thailand - more money for the greedy bankers

Seriously, BoT's prime - 2.75. Banks' prime - 7%. Margin of 4.25%, now 4.50%, WTH ???

Edited May 29, 2013 by reflectionx

[Eesat]

What does this do to the MRR?

MRR

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MRR Ministerstwo Rozwoju Regionalnego (Polish: Ministry

for Regional Development)

MRR Metal Removal Rate (machining) MRR Material Removal Rate MRR Mystic Revelation of Rastafari (band)

Why would it affect the Mystic Revelation of Rastafari?

[yoshiwara]

What does this do to the MRR?

Maroon Rolls Royce models will not be offering discounts.

[paulmw]

This came up last week on news channel Asia from Singapore,

The financial news presenter, stated this would happen this week, also it would be short lived and the Thai baht would again return to where it was earlier this month, mainly due to the Thai gov’t don’t have a set policy to deal with the strengthening baht, and most other markets know and see this

[Pib]

A 25 basis points reduction...pretty much the standard step down (or up) when BOT has made interest rates changes over the years. Take a look at this BOT webpage/document for their interest rate up and down changes since May 2000...Link.

[market trader]

One of the reasons the economy shrunk by 2 1/2% in the first quarter is because of rise in minimum wage to 300 bahts per day. Higher wages means the country is less competitive in export markets.

[Gerald14]

Hope the Baht will drop a bit too

[EvilDrSomkid]

What does this do to the MRR?

Last time they cut the rate, MLR and MRR followed after a few weeks. They cut 0.25 as well.

I hope so. Means our loan repayment goes up instead of the interest part.

[yoshiwara]

One of the reasons the economy shrunk by 2 1/2% in the first quarter is because of rise in minimum wage to 300 bahts per day. Higher wages means the country is less competitive in export markets.

You assume that or you know that?

[IsaanUSA]

I don't really bother following exotics like the Baht but Bloomberg's are quoting a 4-month low for the Baht,surely that can't be right? :

http://www.bloomberg.com/news/2013-05-29/thai-baht-weakens-to-four-month-low-as-interest-rate-cut-seen.html

Of course it's right. Check the rates yourself

EDIT: LOL, they even give specific dates in your own link you posted. Try reading what you post next time. "The baht fell 0.5 percent to 30.15 per dollar as of 8:45 a.m. in Bangkok and touched 30.16 earlier, the weakest level since Jan. 15, according to data compiled by Bloomberg."

Edited May 29, 2013 by IsaanUSA

[bangkokburning]

Well, it did appear tonweaken the thb about 25 satang. So if they get down to <2% then the thb might be in the range some have defined as workable (30.5).

This if money is actually loaned at these cheap rates, its going to overheat the already overheated property market.

Thailand needs to QE, and then put that money into public infrastructure.

What Thailand teally needs to do short term is provide cash relief to agro exporters, see what shakes out in the world in next 24 months. Japan, EU snd US so instable.

Some things like QE cannot be undone. Even jacking up interest rates after all the cronie borrowing sprees not effective.

Thailand needs to start to support and develop value added for farmers.

Mango's in Tops rotting...4 for b19.

[kblaze]

Well, it did appear tonweaken the thb about 25 satang. So if they get down to <2% then the thb might be in the range some have defined as workable (30.5).

This if money is actually loaned at these cheap rates, its going to overheat the already overheated property market.

Thailand needs to QE, and then put that money into public infrastructure.

What Thailand teally needs to do short term is provide cash relief to agro exporters, see what shakes out in the world in next 24 months. Japan, EU snd US so instable.

Some things like QE cannot be undone. Even jacking up interest rates after all the cronie borrowing sprees not effective.

Thailand needs to start to support and develop value added for farmers.

Mango's in Tops rotting...4 for b19.

Wait what? I agree about the potential for an overheating of the property sector. But then you said Thailand needs QE, but that QE cannot be undone. So do you think QE is good or bad? QE is when a govt entity, typically the central bank, buys up bad debt essentially, its not just printing money and putting it aside. They won't just print money to use for the infrastructure deal. They have already stated that they are funding the 2trillion baht infra projects through debt.

And why give cash to farmers? are you insane? (thats in jest not an insult!) The failure of the rice scheme, wait; the HORRENDOUS failure of the rice scheme should be evidence enough that this government doesn't have the wherewithal to pull off ag-related populist policy

Edited May 30, 2013 by kblaze

[Eesat]

One of the reasons the economy shrunk by 2 1/2% in the first quarter is because of rise in minimum wage to 300 bahts per day. Higher wages means the country is less competitive in export markets.

You assume that or you know that?

It's absolute nonsense,the strong Thai Baht is what makes Thailand's exports less competitive,nothing to do with the minimum wage which isn't enforced anyway!

[bangkokburning]

QE is a horrible remedy, but at least if it were spent on something positive it would remove the money from the economy. Nothing like what the US has done. It would even create jobs. It sucks because well, its QE and that debases the currency and once you print money and put it into circulation, its very painful for the economy to draw it back in.

Strong baht has nothong to do with law where the poors are supposed to be paid b300 for their 12 hour day. Even Issan security guards are making this already. Thats just bs for the elite to depress wages.

[kblaze]

Bangkokburning I'm guessing you have heard people use the phrase "they are just printing money" or "Bernankes printing press.." etc etc and took it literally.

As I thought I made clear in my other post, QE is NOT just "printing money". They can't just print money and "put it in circulation"...i mean how the hell would they do that? QE is when the central bank buys assets from financial institutions, generally bad assets. The money being spent by the central bank has a designated purpose and cant be used willy nilly.

You really shouldn't make such blanket statements about something that you obviously don't understand.

[Naam]

Bangkokburning I'm guessing you have heard people use the phrase "they are just printing money" or "Bernankes printing press.." etc etc and took it literally.

As I thought I made clear in my other post, QE is NOT just "printing money". They can't just print money and "put it in circulation"...i mean how the hell would they do that? QE is when the central bank buys assets from financial institutions, generally bad assets. The money being spent by the central bank has a designated purpose and cant be used willy nilly.

You really shouldn't make such blanket statements about something that you obviously don't understand.

too many people are spreading the nonsense "they are printing". telling them that this is not the case is a futile undertaking. they won't listen