Surprise policy rate cut expected

[Lite Beer]

Surprise policy rate cut expected
Sucheera Pinijparakarn
The Nation

BANGKOK: -- Kasikorn Research Centre says the Bank of Thailand needs to slash its policy interest rate by 25 basis points when it meets on December 17 to give the sluggish economy a boost.

Charl Kengchon, KResearch managing director, said gross domestic product this quarter was growing more slowly than expected. He blamed the delays in the government's budget disbursal for contributing to that.

Separately, TMB Analytics is convinced that the policy rate would be cut by 0.25 percentage point in this round. TMB Analytics noted that the slower-than-expected economic growth and downward inflation paves way for relaxation in the monetary policy. Together with fiscal boosts, this should help boost the economy.

HSBC also expects a non-consensus 25-basis pionts rate cut next week. Its economist Nalin Chutchotitham noted that Thailand’s economy still faces key challenges like possible political change, fiscal pressure, household debt, adverse demographics and the need for a new economic growth model.

KResearch, a unit of Kasikornbank, now expects GDP this year to grow by only 1.2 per cent, down from its 1.6-per-cent forecast in October.

Charl said the weak fourth quarter would influence growth going into 2015, and he doubted the 4-per-cent growth target next year was achievable.

He based that belief on the fragile global economic recovery and the lower competitiveness of Thai agricultural products compared with neighbouring countries.

"Looking ahead, Thailand continues facing downsides from the global economy, which is putting pressure on the exports," he said. "Therefore, the growth of the Thai economy in 2015 is expected to rely on domestic consumption.

"To help fuel domestic consumption, the central bank should take action and relax the monetary policy and cut the interest rate amid the low inflation, which is mainly due to the low price of fuel."

If there were a rate cut of 25 basis points, the policy rate would be 1.75 per cent - a figure Charl believes should remain throughout 2015.

But he warned that 2015 was expected to see an upward trend in interest rates globally based on the expectation that the United States would increase its policy rate midyear.

He also said the BOT should have measures in place to deal with capital-flow volatility should it cut the rate. Central bank bonds are a tool it could use to maintain healthy liquidity by minimising outflows.

Kevalin Wangpichayasuk, KResearch assistant managing director, predicted that the crude-oil price would remain low throughout next year because of the tussle between the Organisation of the Petroleum Exporting Countries (Opec) and the US shale-oil industry.

The growth of US shale-oil was influencing global financial markets as well, she said.

Dubai crude oil in 2015 is predicted to stay at US$70 per barrel. Kevalin said the low price benefited net oil importers like Thailand, which was ranked as the 13th-biggest net oil importer in the world.

She said transport, fisheries and mining were the three industries that gained most from the low price, while commodities such as rubber and agricultural products would be affected negatively.

Source: http://www.nationmultimedia.com/business/Surprise-policy-rate-cut-expected-30249727.html

-- The Nation 2014-12-13

[12DrinkMore]

More nonsense economics that will send Thailand down the same path as Japan, US, UK and Europe.

If prices are already lower due to lower fuel costs here is no need to encourage people to take on debt to fund a binge spend, which, if interest rates ever rise again, will be a painful burden on the the population.

With proposals coming from a bank, you can only expect that any interest rate will be immediately slashed from their funding rates on depositors' cash, and not passed on to borrowers. Leaving more profit for the bank.

And what are "Central Bank Bonds"? Never heard of these before.

[worgeordie]

Wish they would stop pandering to people in debit,and start thinking

about people who manage their money,and have no debit and it would

be nice to have interest rates that are at least at inflation rates(not the

inflation rate the govt,says, but in the real world) .

Low interest rates maybe the reason many people in the world are

in debit,Cash is no longer king,everyday your savings are losing

value.

regards Worgeordie

[12DrinkMore]

Wish they would stop pandering to people in debit,and start thinking

about people who manage their money,and have no debit and it would

be nice to have interest rates that are at least at inflation rates(not the

inflation rate the govt,says, but in the real world) .

Low interest rates maybe the reason many people in the world are

in debit,Cash is no longer king,everyday your savings are losing

value.

regards Worgeordie

It is the dichotomy of the politicians.

On the one hand they are saying that we are not saving enough for retirement.

And at the same time they are moaning that we are not taking on enough debt and spending on what is, essentially consumer stuff to keep the GDP going up forever.

But retirement sounds a long way off to them, and saving money is, well, boring, innit? Especially when the interest rates are zero. The priority of today's politicians is to make promises so they they can get another four years at the trough. And there is no better way than to enable the people to buy stuff on debt. They will vote for any idiot if they have a new iPhone on some deal.

After all, the economic recovery is surely just around the next corner, or maybe the next corner but one.

The twits are too busy placating minorities and ensuring a place for their bums on the benches of power to make the difficult plans to deal with the "Japanese Disease" of aging demographics and a thirty years of a flat lining economy. Surely the Central Banks will not let that happen? is the great cop out.

After all, Ben The Bernank insisted that "it would not happen here".

Yeah, well Abe has been creating new Yens at an incredible rate and has failed to do much except drop the value of the Yen, which is a little painful as all the energy is now imported. Won't be very long before the Nuclear Power Stations are back up and running. There is no alternative.

The kings in all this are the central bankers.

And they are there is ensure that financial systems run smoothly, which means low interest rates for the next decade at least, possibly forever.

[IMA_FARANG]

It's called a "put-and-take" economy.

Putting devalued money into the system to create the illusion of "economic growth" on debt spending by consumers.

That's what passes for"growth" in many economies these days.

Nothing but a "tower of cards" that will ultimately collapse on all concerned.

[Anthony5]

When it is expected, then how it can be a surprise?

[Robert24]

well BoT has said that at the current level of interest, monetary policy is already accomodative. So whether the BoT will loosen policy further will be seen. Lower oil prices may help inflation to stay lower, so might give BoT room for another interest rate cut. Also relative to other Asian currencies the Baht is quite strong. So BoT is in a good position and can move rates further if they think that is required.

[elgordo38]

Wish they would stop pandering to people in debit,and start thinking

about people who manage their money,and have no debit and it would

be nice to have interest rates that are at least at inflation rates(not the

inflation rate the govt,says, but in the real world) .

Low interest rates maybe the reason many people in the world are

in debit,Cash is no longer king,everyday your savings are losing

value.

regards Worgeordie

I just rolled over my term deposit and was surprised to get 2.8% for the next 11 months. I guess when that matures the bank will want to charge me interest to park my money with them. Savers have money because they know how to handle it. Spenders are constantly looking for the new "in" thing to buy on credit of course. The new "in" things seem to self destruct after a couple years causing the owner to buy a new one on credit of course.

[wabothai]

What is a "policy rate" ? A special rate for the police?

[rickirs]

Some would call "downward inflation" instead "deflation."

When a country is in deflationary economy, lowering interest rates is a device to encourage borrowing for capital investment. In the USA Treasury bill rates actually went to negative rates during its deepest period of depression bewteen 2008-2011 but still sold out! Unfortunately, the Government is borrowing most of its funds to create false agricultural profits through subsidies and borrow from the Chinese for a double rail project. Gen. Prayuth might become the shortest lived PM in Thai history.

[how241]

When it is expected, then how it can be a surprise?

+1...Exactly what I was thinking, a "expected surprise" ???

[VegasVic]

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Some would call "downward inflation" instead "deflation."

When a country is in deflationary economy, lowering interest rates is a device to encourage borrowing for capital investment. In the USA Treasury bill rates actually went to negative rates during its deepest period of depression bewteen 2008-2011 but still sold out! Unfortunately, the Government is borrowing most of its funds to create false agricultural profits through subsidies and borrow from the Chinese for a double rail project. Gen. Prayuth might become the shortest lived PM in Thai history.

First of all I consider Gen. Prayuth to be the head of a military dictatorship not the PM of Thailand, with that said I don't think that it particularly matters who is at the helm at the moment, the Bank of Thailand has to figure out a way to SLOWLY devalue the Baht so that exports can increase in real terms and tourism can remain stable The lower cost of petroleum products will in itself be a shot in the arm to the Thai economy but that alone will not be enough, Thailand must be proactive in doing all they can on every front to encourage growth in their economy, as there are two very large ticking time bombs in their region of the world ( Japan and China)

[Thai at Heart]

They cannot devalue their way to wealth.

[VegasVic]

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They cannot devalue their way to wealth.

Very true, and of course nowhere in my post did I say that they could "devalue their way to wealth", however they can through a SLOW and hopefully controlled devaluation maintain their market share for their exported products (and perhaps open up new ones as well) and give a shot in the arm to everyone in the tourism business and all the ancillary businesses that support tourism in Thailand Should Thailand lose market share (as they have in certain instances over the past few years) in their export industries, they may have a very difficult time regaining that market share back. I am not posting anything here that is earth shattering or breaking news, the Bank of Thailand is keenly aware of the delicate balancing act that they will have on their hands in 2015 and beyond

[Thai at Heart]

<script type='text/javascript'>window.mod_pagespeed_start = Number(new Date());</script>

They cannot devalue their way to wealth.

Very true, and of course nowhere in my post did I say that they could "devalue their way to wealth", however they can through a SLOW and hopefully controlled devaluation maintain their market share for their exported products (and perhaps open up new ones as well) and give a shot in the arm to everyone in the tourism business and all the ancillary businesses that support tourism in Thailand Should Thailand lose market share (as they have in certain instances over the past few years) in their export industries, they may have a very difficult time regaining that market share back. I am not posting anything here that is earth shattering or breaking news, the Bank of Thailand is keenly aware of the delicate balancing act that they will have on their hands in 2015 and beyond

I promise, that a few extra points on the baht is not going to magically make tourists flock back or exports start to boom again.

They moaned when it was 29 to the USD that it was killing them. What was export growth last year?

1 or 2%

Unless there is an all out currency collapse and a flood of FDI, it won't budge much.

They need productivity and profitability to grow, and stop competing exclusively on price.