Bangkok ditching rate cuts to focus on currency, spending-led growth
HIROSHI KOTANI, Nikkei staff writer

BANGKOK -- The Bank of Thailand will forgo further interest rate cuts to concentrate on stabilizing the nation's currency, Gov. Veerathai Santiprabhob said.

In the current market, government spending has far more potential to drive economic growth than monetary policy does, Veerathai told The Nikkei in an interview here.

Shifting focus

The outlook for the baht is growing hazier as China's yuan continues to slide and further hikes in U.S. interest rates are planned. The Thai currency has shed around 10% of its value over the past year, putting it around 36 to the dollar now. This may have stirred up concerns that the central bank could further cut its policy rate -- at 1.5% annually as of April 2015 -- in a bid to stimulate the economy, exerting excessive weakening pressure on the baht and spurring capital flight.

Full story: http://asia.nikkei.com/Politics-Economy/Economy/Bangkok-ditching-rate-cuts-to-focus-on-currency-spending-led-growth

-- NIKKEI ASIAN REVIEW 2016-01-25

The Thai manage the baht rate against the dollar. It should be around 40

They should be grateful that the Baht is slipping, they don't care about imports (other than collecting the duty) so should be grateful that Thai goods are cheaper on the world market but that is economics which, like democracy and free speech, are foreign concepts here

Compared to many other currencies the baht has done well against the dollar!

It's not April yet.

A rate cut in another month as China's economy continues to contract.

Love Thai economics At that way they handle this The baht will weaken further thus making my exchange much better. One would think by raising savings interests rates would spur money to flow into the country thus creating more growth. I guess they expect China to throw tons of Yuan into this high speed train project? Which by the way If I were China considering the Yuan's Slipping would either call off or put on back burner for a long time. Or better yet raise the interest rates so high That Thailand says no thanks thus saving face we all Know how saving face is so important to Asian's

Love Thai economics At that way they handle this The baht will weaken further thus making my exchange much better. One would think by raising savings interests rates would spur money to flow into the country thus creating more growth. I guess they expect China to throw tons of Yuan into this high speed train project? Which by the way If I were China considering the Yuan's Slipping would either call off or put on back burner for a long time. Or better yet raise the interest rates so high That Thailand says no thanks thus saving face we all Know how saving face is so important to Asian's

Raising interest rates would shrink consumption, due to higher savings and paying off outstanding debts.

The Thai currency has shed around 10% of its value

It's manipulated inflated 'value' that is.

Compared to many other currencies the baht has done well against the dollar!

Its a tough move when everybody else's currency is racing to the bottom which makes their nationals take a look hard look at their travel dollars value or lack there of. Again looking at tourism according to a lot of TV members tourism is down (opposite of TAT) and a cheaper baht would help there. Also a good cleanup of beach, garbage and sewage. All the car manufacturers here would be helped by a cheaper baht to export their product. I am surprised that they have not weighed in on the the subject or are they just silently packing up and moving. Throw in the present military government and drought as a wild card. You can spend all you want on growth but in the end you must be competitive or all that so called growth just stagnates. Your not a stand alone country anymore your part of a global village. Methinks that defending the currency will be a proud but disasterous move as the future will show. Going against the grain has always been the Thai way of doing things. Also there is the concept that in Thailand usually a U turn is done and the opposite happens.

It's not April yet.

A rate cut in another month as China's economy continues to contract.

I concur. You cannot swim upstream in a climate where other currencies are racing to the bottom. Tourists are looking for a bigger bang for the buck and a high baht does not provide this. Manufacturing is also looking for a cheaper baht to push out their products. They are constantly eyeing countries where currencies are dropping. Thailand is notorious for doing a U turn so watch for this in the future. Hot money is also looking for a bargain and not necessarily a artificially propped up currency. If anything this scares them off. They can throw out all the rubber numbers they want but by years end the truth will emerge and then a lowing of the currency might become a must not an option. Its best to do this gradually and not in one fell swoop. Investors do not like sudden surprises.

It's not April yet.

A rate cut in another month as China's economy continues to contract.

I concur. You cannot swim upstream in a climate where other currencies are racing to the bottom. Tourists are looking for a bigger bang for the buck and a high baht does not provide this. Manufacturing is also looking for a cheaper baht to push out their products. They are constantly eyeing countries where currencies are dropping. Thailand is notorious for doing a U turn so watch for this in the future. Hot money is also looking for a bargain and not necessarily a artificially propped up currency. If anything this scares them off. They can throw out all the rubber numbers they want but by years end the truth will emerge and then a lowing of the currency might become a must not an option. Its best to do this gradually and not in one fell swoop. Investors do not like sudden surprises.

A rate cut causes household and speculative debts to inflate further, but would result in more outflow of foreign money leading to a weaker Baht.

To avoid the first, new regulations have to be enacted to tighten against loose credit given by lending institutions and merchants.

Look at the THB/Gold ratio vs the USD/Gold ratio over the last year as the THB has been weakening against the USD. Interesting.