Bank of Thailand cuts policy rate

[webfact]

Policy rate cut

BANGKOK: -- The Bank of Thailand reacted to slow economic condition with a decision to cut the policy rate by 0.25 percentage point to 1.75 per cent.

Four members of the Monetary Policy Committee voted for the cut, while the other three maintained the view that the current rate was accommodative.

The decision was a surprise, though some economists believed that the central bank would need to act given slow economic activities in January.

Source: http://www.nationmultimedia.com/breakingnews/Policy-rate-cut-30255790.html

-- The Nation 2015-03-11

[Berkshire]

Well if theory holds, this should weaken the THB a bit.

[webfact]

ECONOMY
BOT jumps on easing bandwagon
The Nation

BANGKOK: -- The Bank of Thailand reacted to slow economic condition with the decision to cut the policy rate by 0.25 percentage point, the first time since March 2014.

Four members of the Monetary Policy Committee voted for the cut, while the other three maintained the view that the 2 per cent rate was supportive of economic recovery.

In the meeting in March 2014, only four members voted for a 25-basis point cut, while the remaining three believed that the 2.25 per cent rate was accommodative to economic growth.

The decision was a surprise, though some economists believed that the central bank would need to act given slow economic activities in January. In the past months, several central banks have jumed on the easing bandwagon. In February, the Reserve Bank of Australia (RBA) cut rates for the first time since August 2013, as falling commodity prices hurt the economy. In the same month, Indonesia’s central bank also cut its benchmark interest rate for the first time since 2012, by 25 basis points to 7.50 per cent.

According to Mathee Supapongse, secretary of Thailand’s MPC, in the policy deliberation, the committee judged that the outlook of the Thai economic recovery is weaker than previously assessed. Fiscal stimulus will take time to materialise, while headline inflation is projected to remain low for a certain period of time.

Against this backdrop, four members judged that monetary policy should be eased further to provide more support to economic recovery, and help shore up private sector's confidence. Nevertheless, three members deemed the current policy rate as still being sufficiently supportive of economic recovery, while the policy space should be preserved as a shock absorber, to be used when more necessary and when policy transmission is more effective. Fiscal stimulus, especially the implementation of planned public investment, should be a key growth driver at this juncture.

The central bank forecast economic growth rate of 4 per cent this year, against the meagre growth of 0.6 per cent in 2014.

In a research note released last week, Nalin Chutchotitham, the economist of HSBC Thailand, noted that as economic recovery is its early stages, policymakers will remain under pressure to lift growth. For the government, the solution is straightforward: ensure timely budget spending and accelerate public investment. However, the Bank of Thailand faces a dilemma whether to ease monetary conditions further given high household leverage and global

financial market uncertainties.

"In our view, the BOT will have to act if growth does not pick up meaningfully soon. Even though one rate cut may make little difference in practice, it will be instrumental for safeguarding private sector confidence, which is much needed in the early stages of domestic demand recovery," she said.

The bank did not expect a any change in the policy rate throughout the year, while foreseeing a slight increase to 2.25 per cent at the end of 2016.

According to the central bank, the Thai economy continued to recover at a slow pace in January, with the tourism sector being the main driver.

Domestic private spending was flat as consumers remained cautious about spending and businesses still awaited clarity on economic recovery and government's infrastructure investment. Meanwhile, fiscal spending tapered off after the disbursement was expedited in the previous month. Exports dropped due to weak demand from China and Asean countries and low prices of oil-related goods. In addition, the decline in global oil prices led to negative inflation and the current account surplus for the fourth consecutive month.

Source: http://www.nationmultimedia.com/business/BOT-jumps-on-easing-bandwagon-30255792.html


-- The Nation 2015-03-11

[webfact]

Thailand cuts interest rates as economy stutters
AFP

BANGKOK: -- Thailand's central bank cut its benchmark interest rate Wednesday in a surprise move to boost the kingdom's economy, which is still struggling despite junta promises to revive its fortunes since taking power last year.

The Bank of Thailand said in a statement its policy board members voted by 4-3 to cut the rate to 1.75 percent from 2.0 percent. Most analysts had been expecting it to hold rates.

The reduction is the first since last March as the recovery in the economy since the junta's May coup has been slower than hoped.

It is also the latest by regional central banks -- including China and India -- as they try to prop up their economies in the face of a global slowdown.

"The committee judged that the outlook of the Thai economic recovery is weaker than previously assessed," the bank warned.

"Fiscal stimulus will take time to materialise, while headline inflation is projected to remain low for a certain period of time," it added.

The Thai baht slipped to 32.86 against the dollar after the announcement, its lowest since mid-January.

Thailand's economic growth slowed sharply in 2014 to its weakest pace in three years, as political compounded a fall in agricultural prices and waning exports.

Gross domestic product (GDP) expanded 0.7 percent last year, well down from the 2.9 percent recorded in 2013.

Thailand's military takeover brought to an end months of disruptive street protests against Yingluck Shinawatra's democratically elected administration.

While the coup ended the protests -- part of a cycle of 10 years of political instability dogging the kingdom -- the military's pledge to drive an economic revival has yet to materialise.

The junta has vowed to pump billions of dollars into the economy, mainly through long-planned infrastructure schemes.

But analysts say the cash has yet to appear, while continued political uncertainty, weak global demand and low prices for key Thai exports such as rubber and rice have dimmed hopes for the spending blitz.

Last month junta chief Prayut Chan-O-Cha said he expects the country's economy to grow between three and four percent this year.

-- (c) Copyright AFP 2015-03-11

[Pib]

Just using today's Bangkok Bank TT Buying Rate used for incoming wire transfers, this morning's 8:30am rate for the USD was 32.52, GBP 48.9275, and Euro 34.715.

The afternoon's rate at 4:10pm after the BOT rate cut a few hours earlier the USD was 32.72 (up 0.61%), GBP 49.18 (up 0.52%) and Euro 34.73 (up 0.04%).

Looks like the rate cut was very positive for the USD and GBP but not so much so for the Euro, but I expect lack of much upside on the Euro-Baht rate is due to the Euro continuing to drop against most currencies today which all but offset the BOT policy rate cut impact against the Euro...pretty much just kept the Euro-Baht rate from dropping further.

[Srikcir]

Expect another policy rate cut by 0.25 percentage point within the next month. A dribble out of cuts will not attact much attention and Thailand can better prepare for the impact.

[Srikcir]

Exports are almost flat. The domestic economy is almost flat. Prices for agricultural products have not improved and may decline further. The only salvation for ANY GDP growth in 2015 is massive government investment.

But:

- The Kingdom's economy is still struggling despite junta promises to revive its fortunes since taking power last year.

- The junta has vowed to pump billions of dollars into the economy, mainly through long-planned infrastructure schemes.

- But analysts say the cash has yet to appear.

The Junta is happy with its double and triple incomes generated by unlimited and unaccountable access to the nation’s treasury. Once it gets the new constitution passed to enshrine its power permanently into law, it will have little concern for its subjects. Expect no further help from the Junta other than to pay more taxes.

[SOUTHERNSTAR]

Just using today's Bangkok Bank TT Buying Rate used for incoming wire transfers, this morning's 8:30am rate for the USD was 32.52, GBP 48.9275, and Euro 34.715.

The afternoon's rate at 4:10pm after the BOT rate cut a few hours earlier the USD was 32.72 (up 0.61%), GBP 49.18 (up 0.52%) and Euro 34.73 (up 0.04%).

Looks like the rate cut was very positive for the USD and GBP but not so much so for the Euro, but I expect lack of much upside on the Euro-Baht rate is due to the Euro continuing to drop against most currencies today which all but offset the BOT policy rate cut impact against the Euro...pretty much just kept the Euro-Baht rate from dropping further.

The more governments meddle in the economy the more distorted markets gets. If they leave it alone the Baht will decrease in time due to the bad economic outlook. By decreasing the interest rate they are pushing more people into debt. Here is a link to an article about debt to GDP ratio's for countries including Thailand. Since 2007 Thailands government debt increased with 11%, corporate debt with 6% and household debt with 26%. http://www.zerohedge.com/news/2015-02-23/biggest-problem-facing-world-today-9-countries-have-debt-gdp-over-300

[Guest]

Annnnnnnnnd ... Thank You !!!

Edited March 11, 2015 by Guest

[96tehtarp]

This is a race to the bottom.

[cookee68]

What ever happened to the good old days when we got 76 plus Baht to the GBP, gone forever along with some of my old memories, those were great days in Thailand, days that will never return again. SADLY

Edited March 11, 2015 by cookee68

[The Deerhunter]

Well if theory holds, this should weaken the THB a bit.

Hope so. It is over-valued at the moment against my home currency.

[how241]

This is a race to the bottom.

+1...Yes that's is happening in most countries.

[Rob8891]

What ever happened to the good old days when we got 76 plus Baht to the GBP, gone forever along with some of my old memories, those were great days in Thailand, days that will never return again. SADLY

Nostalgia just ain't what it used to be, huh?

[soalbundy]

Well if theory holds, this should weaken the THB a bit.

Hasn't regarding the Euro, the Euro has just dropped another 30 satang

[Pib]

Well if theory holds, this should weaken the THB a bit.

Hasn't regarding the Euro, the Euro has just dropped another 30 satang

The policy cut did weaken the baht; unfortunately, the Euro weakened more due to other factors not related to the BOT policy rate cut.

The Euro just seems to be in a free fall right now....hope its parachute opens soon.

[maidee]

in the meantime : the euro is at 34.xx

incredible ...