MPC could trim policy rate again: Sommai

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POLICY RATE
MPC could trim policy rate again: Sommai
Erich Parpart
The Nation


Sommai Phasee

BANGKOK: -- Thailand's economy has been suffering from the softness in global demand, so the Bank of Thailand's Monetary Policy Committee (MPC) could "in theory" continue its accommodative trend and lower the policy interest rate by another 25 basis points at its next meeting on April 29, Finance Minister Sommai Phasee said yesterday.

The central bank still has space to take further steps to invigorate the economy, as the country is running a current-account surplus and inflation is in negative territory, he said.

The MPC surprised the market by taking the benchmark rate down from 2 per cent to 1.75 per cent on March 11.

The current account showed a US$3.51-billion surplus at the end of February, while headline inflation was negative-0.57 per cent at the end of last month.

The central bank in March trimmed its forecast for GDP growth this year from 4 per cent to 3.8 per cent because of sluggish exports.

"In theory, you cannot not just lower the policy interest rate by 50-75 basis points in one go because you have to lower it by 25 basis points at a time to make people believe that the rate is on its way down and that would help depreciate the baht," Sommai said.

"If you inject the anaesthetic another time it would help but that is up to the central bank to decide because they also know the same theory as me," he said.

"More fiscal stimulus measures are coming, since monetary and fiscal measures both have a supportive role for the economy.

"If the MPC does not lower the rate next time it would probably mean that it does not want to signal that the baht is on a downtrend," he said.

The Joint Standing Committee on Commerce, Industry and Banking at its meeting this month continued to urge the central bank to mitigate the strong baht in order to increase the country's exchange-rate competitiveness.

The Finance Ministry is to meet next Wednesday with three financial institutions that have gained its approval to provide nano-financing but have yet to offer any micro-loans. It wants follow up after Prime Minister Prayut Chan-o-cha's inquiry into the development of the policy, which seemed to be going slower than expected.

"The three financial institutions had made plans up to the moment they received the licence and they need more time to prepare once they had received it, so we are asking them to come in to find out what we can do to help hurry things up," Sommai said.

Two state banks, the Government Savings Bank and the Bank for Agriculture and Agricultural Cooperatives, are the two institutions that will provide Bt40 billion (Bt20 billion each) in loans to top up revolving village funds, which is part of the ministry's policy to stimulate the grass-roots economy, he said.

Natee Khlibtong, secretary-general of the National Village and Urban Community Fund, said the 79,255 member villages would receive up to Bt1 million each, depending on their credit rating, from the Bt40-billion re-capitalisation of village funds through the government budget and loans.

The Finance Ministry expects this measure to get off the ground in the third or fourth quarter.

The government has already spent Bt207.53 billion on the village fund scheme, which accounted for 10 per cent of the state budget in 2015.

Source: http://www.nationmultimedia.com/business/MPC-could-trim-policy-rate-again-Sommai-30258119.html


-- The Nation 2015-04-17

[Orac]

Sounds pretty much that he is putting pressure on MPC to reduce rates with the aim of depreciating the baht.

[Srikcir]

Lowering by another 25 basis points before summer was predictable, just not admittable by Sommai in January 2015. Everyone in Prayut's cabinet is desparately playing the game that the economy is improving thanks to the efforts of the Junta that brought the economy to the brink of collapse. The irony is that it is the strength of the US dollar that is proping up the value of the baht while the Junta's foreign policies seek to distance Thailand politically from the US.

[samran]

Sounds pretty much that he is putting pressure on MPC to reduce rates with the aim of depreciating the baht.

Probably. But Sommai knows better than most that you can't push the BOT. He wrote the clause granting the head of the BOT independence.

[Pib]

Sounds pretty much that he is putting pressure on MPC to reduce rates with the aim of depreciating the baht.

Probably. But Sommai knows better than most that you can't push the BOT. He wrote the clause granting the head of the BOT independence.

Yea, Finance Ministers frequently try to pressure BOT into lowering rates...but it's just another voice (a political voice) in the crowd to BOT.

[Orac]

Sounds pretty much that he is putting pressure on MPC to reduce rates with the aim of depreciating the baht.

Probably. But Sommai knows better than most that you can't push the BOT. He wrote the clause granting the head of the BOT independence.

Yea, Finance Ministers frequently try to pressure BOT into lowering rates...but it's just another voice (a political voice) in the crowd to BOT.

Not when someone holds absolute power.

[Pib]

Sounds pretty much that he is putting pressure on MPC to reduce rates with the aim of depreciating the baht.

Probably. But Sommai knows better than most that you can't push the BOT. He wrote the clause granting the head of the BOT independence.

Yea, Finance Ministers frequently try to pressure BOT into lowering rates...but it's just another voice (a political voice) in the crowd to BOT.

Not when someone holds absolute power.

Finance Ministers, even the current one, does not hold absolute power. Even the current PM wouldn't play that game with the BOT.

[Orac]

Sounds pretty much that he is putting pressure on MPC to reduce rates with the aim of depreciating the baht.

Probably. But Sommai knows better than most that you can't push the BOT. He wrote the clause granting the head of the BOT independence.

Yea, Finance Ministers frequently try to pressure BOT into lowering rates...but it's just another voice (a political voice) in the crowd to BOT.

Not when someone holds absolute power.

Finance Ministers, even the current one, does not hold absolute power. Even the current PM wouldn't play that game with the BOT.

I would hope not but the government does hold an awfully big stick to get what it wants at the moment. I also remember the huge mess after the last coup when they started tinkering and imposed a withholding tax on foreign capital without thinking through the consequences and these are the same ppl in charge now.