Thailand surprises with cut in interest rate

[webfact]

Thailand surprises with cut in interest rate
By Nopparat Chaichalearmmongkol

BANGKOK--Thailand's central bank surprised the market with another interest-rate cut due to a slower-than-expected economic recovery.

The Bank of Thailand's monetary policy committee members voted 5-2 Wednesday to cut the one-day repurchase rate, the bank's benchmark interest rate, by 0.25 percentage point to 1.5%.

The decision comes after another surprise 0.25 percentage-point cut in March.

"The economic recovery appears to be recovering at a slower pace than estimated at the previous meeting," said Mathee Supapongse, the MPC secretary. "[This is] in spite of higher government budget disbursement and an improved outlook of the tourism industry which have been inadequate to offset much-weaker-than-expected exports and private consumption in the first quarter of 2015."

Full story: http://www.marketwatch.com/story/thailand-surprises-with-cut-in-interest-rate-2015-04-29

-- Marketwatch 2015-04-29

[bdenner]

Can only be good news for those of us transferring our foreign cash into this country on a regular basis.

[mogo51]

sh

The country needs more than .25% interest rate to fix the economy. It needs to devalue to encourage exports and ramp up tax reforms.

Mostimportantly, it needs to enter the 21st century and encourage more foreign investment. Allow foreign ownership of property, even if

they restrict to one property with a reasonable value - this would encourage foreigners to come here, purhase prooperties and boost the

building sector.

Adopting a more welcome and honest approach to trade agreements, would also be a good idea. But maybe Iam dreaming1

[webfact]

Surprise Thai rate cut as junta trims growth forecast

AFP

BANGKOK: -- Thailand's central bank cut its benchmark interest rate Wednesday in a surprise move highlighting the junta's struggle to revive the faltering economy.

The Bank of Thailand said in a statement policy board members voted by 5-2 to cut the rate to 1.50 percent from 1.75 percent, its lowest since July 2010.

The decision came just hours after the finance ministry downgraded its growth forecast for 2015 from 3.9 to 3.7 percent.

The interest rate cut surprised most analysts. A survey by Bloomberg of 20 regional economists found 18 had expected the bank to keep the rate steady since it had already slashed the rate by 0.25 percentage points in March.

Economic growth slowed sharply in 2014 to its weakest pace in three years, as political instability compounded a fall in agricultural prices, waning exports and low consumer confidence.

The military, which took over in a coup last May after months of disruptive street protests, has vowed to kickstart the economy.

But aside from a bump in tourist numbers since protests ended, the junta has failed to ignite growth.

In February the finance minister said he had been told by junta chief Prayut Chan-O-Cha to push for at least 4.0 percent growth for 2015, something many analysts thought optimistic.

The World Bank estimates growth for 2015 will be closer to 3.5 percent.

In its statement the Bank of Thailand said it believed the economy would recover "at a slower pace" than previously assessed because of continued weaker than expected exports, low consumer confidence and inflationary pressures.

"There is no denying the weakness of recent economic data," Krystal Tan, an economist at Capital Economics, said in a briefing note after the rate cut.

But she said there was still room for optimism further down the track, "helped by an increase in government spending, a resurgent tourism sector, and earlier rates cuts".

Observers say prolonged weak growth may heap pressure onto the junta as it tries to pass a new constitution before fresh elections mooted for next year.


-- (c) Copyright AFP 2015-04-29

[brain150]

Can anybody give me just one reason why the economy should recover ???

... a broken system [globally] is broken and needs replacement.

Putting more gasoline in a leaking tank won't make the engine run.

[Shiver]

Can anybody give me just one reason why the economy should recover ???

... a broken system [globally] is broken and needs replacement.

Putting more gasoline in a leaking tank won't make the engine run.

There's nothing that I can see globally that could unwind the position we're in. The snake is eating it's own tail, and we can see governments around the world launching initiatives to collect more taxes rather than cut costs by increased efficiency. Even that would only be kicking the can down they road. Such is the nature of a Keynesian monetary system.

If history is going to repeat itself, looking at the market cycles of things like S&P, we should be due another major correction within the next year or two (that's not a prediction of mine, just things I read). How Thailand and other countries will deal with that will be interesting to see, and wonder if that might mark the beginning of the collapse of a couple of major currencies.

[Suffinator]

sh

The country needs more than .25% interest rate to fix the economy. It needs to devalue to encourage exports and ramp up tax reforms.

Mostimportantly, it needs to enter the 21st century and encourage more foreign investment. Allow foreign ownership of property, even if

they restrict to one property with a reasonable value - this would encourage foreigners to come here, purhase prooperties and boost the

building sector.

Adopting a more welcome and honest approach to trade agreements, would also be a good idea. But maybe Iam dreaming1

What you are proposing is common sense, unfortunately you are dreaming as you pointed out. I've always said that Thailand's income could be significantly increased if they allowed ownership of property even if they capped it at 2 rai. Trouble is those pesky foreigners will be digging it up and taking it with them ... that's their perception at least. Yes can't have foreigners stealing the land as their won't be any left for the Thai. It's a train of thinking that beggars belief in modern times and one of the reasons economic growth is restricted.

[luckyman]

The baht did not react after last month' rate cut and neither will it this time around.

Reality bites, hey, General ?

[laislica]

sh

The country needs more than .25% interest rate to fix the economy. It needs to devalue to encourage exports and ramp up tax reforms.

Mostimportantly, it needs to enter the 21st century and encourage more foreign investment. Allow foreign ownership of property, even if

they restrict to one property with a reasonable value - this would encourage foreigners to come here, purhase prooperties and boost the

building sector.

Adopting a more welcome and honest approach to trade agreements, would also be a good idea. But maybe Iam dreaming1

What you are proposing is common sense, unfortunately you are dreaming as you pointed out. I've always said that Thailand's income could be significantly increased if they allowed ownership of property even if they capped it at 2 rai. Trouble is those pesky foreigners will be digging it up and taking it with them ... that's their perception at least. Yes can't have foreigners stealing the land as their won't be any left for the Thai. It's a train of thinking that beggars belief in modern times and one of the reasons economic growth is restricted.

If they did that the Foreigners would jump in and start buying those 2 Rai.

Thais eager for profit will rapidly increase the price.

Foreigners will pay and don't exclude the Chinese in this discussion, they would grab as much as they could!

In no time the price of land and therefore property will have spiralled out of control and Thais will no longer be able to afford to buy.

Don't believe me?

Look at what happened in Spain after Franco!

As soon as foreigners could buy, land/property prices escalated at an unbelievable rate.

And then crashed - of course!

but that's another story.

[Tassie Norm]

sh

The country needs more than .25% interest rate to fix the economy. It needs to devalue to encourage exports and ramp up tax reforms.

Mostimportantly, it needs to enter the 21st century and encourage more foreign investment. Allow foreign ownership of property, even if

they restrict to one property with a reasonable value - this would encourage foreigners to come here, purhase prooperties and boost the

building sector.

Adopting a more welcome and honest approach to trade agreements, would also be a good idea. But maybe Iam dreaming1

What you are proposing is common sense, unfortunately you are dreaming as you pointed out. I've always said that Thailand's income could be significantly increased if they allowed ownership of property even if they capped it at 2 rai. Trouble is those pesky foreigners will be digging it up and taking it with them ... that's their perception at least. Yes can't have foreigners stealing the land as their won't be any left for the Thai. It's a train of thinking that beggars belief in modern times and one of the reasons economic growth is restricted.

"perception at least' is correct. One can invest - with the funds - in my place of birth ridiculously easy. At the end of the day you cannot remove that modest 'rai' of land elsewhere and in the meantime you have contributed significantly to the economy. But, we adapt if we love this weird world as I do......

[12DrinkMore]

sh

The country needs more than .25% interest rate to fix the economy. It needs to devalue to encourage exports and ramp up tax reforms.

Mostimportantly, it needs to enter the 21st century and encourage more foreign investment. Allow foreign ownership of property, even if

they restrict to one property with a reasonable value - this would encourage foreigners to come here, purhase prooperties and boost the

building sector.

Adopting a more welcome and honest approach to trade agreements, would also be a good idea. But maybe Iam dreaming1

What you are proposing is common sense, unfortunately you are dreaming as you pointed out. I've always said that Thailand's income could be significantly increased if they allowed ownership of property even if they capped it at 2 rai. Trouble is those pesky foreigners will be digging it up and taking it with them ... that's their perception at least. Yes can't have foreigners stealing the land as their won't be any left for the Thai. It's a train of thinking that beggars belief in modern times and one of the reasons economic growth is restricted.

"perception at least' is correct. One can invest - with the funds - in my place of birth ridiculously easy. At the end of the day you cannot remove that modest 'rai' of land elsewhere and in the meantime you have contributed significantly to the economy. But, we adapt if we love this weird world as I do......

You may not be able to move the land anywhere, but you will cause the price to rise, causing the rents to rise, sending a wave of inflation into the economy, pricing out all but the rich and leaving the poor struggling to pay the rent.

Check out the UK.

[MichaelJohn]

The baht did not react after last month' rate cut and neither will it this time around.

Reality bites, hey, General ?

According to the Kasikorn Website the GBP is now back at 50 for TT's; that's an improvement :-)

And just checking now Superrich is quoting £:50.25 and the $32.75 .......................

[Pib]

Just my luck...I do Bt124K (approx US$3,800) of counter and ATM withdrawals today/Wednesday at two different Thai banks using my foreign Visa debit and credit cards. Since Visa sets it rates every 24 hours (noon to noon Thailand time right now) it won't be until Thursday or Friday until the BOT rate cut appears in the Visa rates assuming something else in the forex market don't counter the BOT rate move. But actually Bt64K of that Bt124K was using my no foreign transaction fee and no cash advance fee credit card to do a counter withdrawal (I've already paid it off to avoid any interest charge)...that charge won't post/finalize to my account until Thursday or Friday which means I should benefit from the rate cut assuming Thr/Fri Visa rates are better. But for my two foreign transaction fee debit cards which also reimburse ATM fees, those two ATM withdrawals immediately hit my account at today's Visa exchange rate. Oh well...exchange rates are like playing craps sometimes.

[whiteman]

The baht did not react after last month' rate cut and neither will it this time around.

Reality bites, hey, General ?

You are wrong the new zealand $ jumped from 24.3. to 24.9 today thats nearly 2.5% on 15000 I just brought in to day for my top up for my retiement visa in 3 months time

[ExpatOilWorker]

Exports are down the last 3 months, but so are imports, leaving Thailand with another $1 billion trade surplus. The trade surplus will strengthen the Thai baht, which in turn will weaken export and the general economy.

It is a death spiral a 0.25% rate cut will not fix.

[HerbalEd]

Can only be good news for those of us transferring our foreign cash into this country on a regular basis.

Not if the exchange rate doesn't change.

[Pib]

The baht did not react after last month' rate cut and neither will it this time around.

Reality bites, hey, General ?

You are wrong the new zealand $ jumped from 24.3. to 24.9 today thats nearly 2.5% on 15000 I just brought in to day for my top up for my retiement visa in 3 months time

Well, the higher rate you got for your NZ dollars today was probably "not" due to BOT rate change because using the Bangkok Bank TT Buying Rate as a reference it was 24.88 this morning at 08:30, 24.90 at 12:25 which was "before" the BOT rate cut announcement. At close today "after" the announcement it was 24.99. So, it appears you missed out on any exchange benefit from the BOT announcement.

Plus, Bangkok Bank's NZ$ TT Buying Rate for all day yesterday was 24.64. Where are you getting a low 24.3 rate? Hopefully you are not letting your NZ bank convert to baht before sending?

[whiteman]

The baht did not react after last month' rate cut and neither will it this time around.

Reality bites, hey, General ?

You are wrong the new zealand $ jumped from 24.3. to 24.9 today thats nearly 2.5% on 15000 I just brought in to day for my top up for my retiement visa in 3 months time

Well, the higher rate you got for your NZ dollars today was probably "not" due to BOT rate change because using the Bangkok Bank TT Buying Rate as a reference it was 24.88 this morning at 08:30, 24.90 at 12:25 which was "before" the BOT rate cut announcement. At close today "after" the announcement it was 24.99. So, it appears you missed out on any exchange benefit from the BOT announcement.

Plus, Bangkok Bank's NZ$ TT Buying Rate for all day yesterday was 24.64. Where are you getting a low 24.3 rate? Hopefully you are not letting your NZ bank convert to baht before sending?

I bank with SCB and you do not think the smart money knew ahead of the announcement and also at the days end SCB was paying 25.04 and I do no convert in NZ in the end the thai Bhat dropped in my case v the nz because of the announcement from yesterdays 24.3 to between 25.05 I just happend to clip the ticket at 24.89 from yesterdays price. You happy now for I am??????

[12DrinkMore]

Exports are down the last 3 months, but so are imports, leaving Thailand with another $1 billion trade surplus. The trade surplus will strengthen the Thai baht, which in turn will weaken export and the general economy.

It is a death spiral a 0.25% rate cut will not fix.

Imports are down due to the oil price, which is a good thing.

The trade surplus should, in theory, feed through into an improvement in living standards for Thais. And although many would deny it or cite reasons why it is not or should not or will not be the case, the living standards in Thailand and Asia have gradually improved over the last two decades.

We are experiencing the rebalancing of the global economies.

Why should the exporters of goods accept the crappy bits of paper from the West?

If Nixon had not closed the gold window, Thailand and the rest of Asia would have depleted all the gold in the West down to nothing. But the French wanted gold and not Fed paper, so Nixon stopped the drain on a real asset.

Asia now wants a fair share of the global cake.

And it will take it.

[elgordo38]

Can anybody give me just one reason why the economy should recover ???

... a broken system [globally] is broken and needs replacement.

Putting more gasoline in a leaking tank won't make the engine run.

So Thai's who are overextended at the bank should rush out and borrow more at a cheaper rate? Its borrowing that got them in the hole in the first place borrowing more is not the answer.

[Srikcir]

The only suprise is why it didn't cut earlier?

"[CEO of Asia Plus Group Holdings Securities] Kongkiat [Opaswongkarn] explained that a lower policy interest rate would help the export sector due to it leading to an expected depreciation of the baht while increased government investment spending should increase business sentiment." The Nation 2015-04-24

"All the economic engines appear to have stopped functioning rendering Thailand’s economic outlook the worst in 40 years, said Mr Thanawat Polvichai, director of the Economic and Business Forecast Centre of the University of Thai Chamber of Commerce." 2015-04-17

[Pib]

I bank with SCB and you do not think the smart money knew ahead of the announcement and also at the days end SCB was paying 25.04 and I do no convert in NZ in the end the thai Bhat dropped in my case v the nz because of the announcement from yesterdays 24.3 to between 25.05 I just happend to clip the ticket at 24.89 from yesterdays price. You happy now for I am??????

Naw, the great majority of economists/traders/money exchangers were unsure to surprised...that's why you saw the healthy spike "right after" the BOT announcement for numerous currency THB currency pairs. If the smart money had known in advance you would not have seen much of spike. Plus, the NZ $ along with some other currencies paired against the baht has been rising for about a week now due to weak economic data coming out on the Thai economy, but most money traders still felt BOT was not ready to move just yet....seems most was guessing it would occur at their 10 June meeting. And the NZ $ has been rising against other currency pairs like the US $ for about two weeks now which also helps it against the baht...see below.

[sawati]

Just my luck...I do Bt124K (approx US$3,800) of counter and ATM withdrawals today/Wednesday at two different Thai banks using my foreign Visa debit and credit cards. Since Visa sets it rates every 24 hours (noon to noon Thailand time right now) it won't be until Thursday or Friday until the BOT rate cut appears in the Visa rates assuming something else in the forex market don't counter the BOT rate move. But actually Bt64K of that Bt124K was using my no foreign transaction fee and no cash advance fee credit card to do a counter withdrawal (I've already paid it off to avoid any interest charge)...that charge won't post/finalize to my account until Thursday or Friday which means I should benefit from the rate cut assuming Thr/Fri Visa rates are better. But for my two foreign transaction fee debit cards which also reimburse ATM fees, those two ATM withdrawals immediately hit my account at today's Visa exchange rate. Oh well...exchange rates are like playing craps sometimes.

Very interesting but very confusing.

[MZurf]

sh

The country needs more than .25% interest rate to fix the economy. It needs to devalue to encourage exports and ramp up tax reforms.

Mostimportantly, it needs to enter the 21st century and encourage more foreign investment. Allow foreign ownership of property, even if

they restrict to one property with a reasonable value - this would encourage foreigners to come here, purhase prooperties and boost the

building sector.

Adopting a more welcome and honest approach to trade agreements, would also be a good idea. But maybe Iam dreaming1

What you are proposing is common sense, unfortunately you are dreaming as you pointed out. I've always said that Thailand's income could be significantly increased if they allowed ownership of property even if they capped it at 2 rai. Trouble is those pesky foreigners will be digging it up and taking it with them ... that's their perception at least. Yes can't have foreigners stealing the land as their won't be any left for the Thai. It's a train of thinking that beggars belief in modern times and one of the reasons economic growth is restricted.

He!!, I'd be happy with half a rai!

[Cake Monster]

The rate of the Baht to $ after 10 minutes of the announcement being made, showed an increase on the Baht of around 0.7%, up from around 32.6 to 32.85 / $.

The baht needs to be at 33.5 / $ to really make any kind of inpact on growth.

With the new lower rate of 1.5% base, this will give the Authorities a new headache, in trying to rein in private debt, which is already at near 90% of GDP, as the cost of borrowing will now be cheaper.

Edited April 30, 2015 by Cake Monster

[smedly]

The rate of the Baht to $ after 10 minutes of the announcement being made, showed an increase on the Baht of around 0.7%, up from around 32.6 to 32.85 / $.

The baht needs to be at 33.5 / $ to really make any kind of inpact on growth.

With the new lower rate of 1.5% base, this will give the Authorities a new headache, in trying to rein in private debt, which is already at near 90% of GDP, as the cost of borrowing will now be cheaper.

I agree, private debt is astronomical right now and the first car scheme didn't help were people thought they could now afford a car but couldn't really, there is also the hidden debt from illegal money lenders that is not considered in any official measure, sooner or later it's all going to catch up, how much would Thailand have to borrow to cover the banks private debt defaults ?

I have to hand it to the banks last year especially the agri bank for digging their heels and sticking to the rules when PTP wanted loans to pay the farmers

Edited April 30, 2015 by smedly

[Robert24]

The baht did not react after last month' rate cut and neither will it this time around.

Reality bites, hey, General ?

Well it weakened quite a bit......have a look at the currency rates

[Wombat6]

The baht did not react after last month' rate cut and neither will it this time around.

Reality bites, hey, General ?

Wrong !! haven't you been watching the exchange rates ??

[NeverSure]

Asia now wants a fair share of the global cake.

And it will take it.

[fiddlehead]

Well, I didn't major in economics and there are a lot of you smarter than me.
But, to say that devaluation of the baht won't help an agricultural country is something I can't understand.

It would help tourism also IMO.

Maybe someone can explain it for me: How a lower baht would hurt Thailand economically.