Thailand Keeps Benchmark Rate Unchanged Ahead of Referendum

[webfact]

Thailand Keeps Benchmark Rate Unchanged Ahead of Referendum

Suttinee Yuvejwattana 

 

- Most economists predicted rate to remain at 1.5 percent

- Central bank says it must keep policy space to counter risks

 

BANGKOK: -- Thailand kept its key interest rate unchanged, as expected by most economists, opting to hold fire before an upcoming referendum and allow fiscal policies to take the lead in spurring the economy.

 

The Bank of Thailand held its one-day bond repurchase rate at 1.5 percent in a unanimous decision of the seven-member Monetary Policy Committee, it said in Bangkok on Wednesday. All but one of the 23 economists surveyed by Bloomberg News predicted the decision, with Royal Bank of Scotland Plc forecasting a 25 basis-point cut.

 

The military government, led by Prime Minister Prayuth Chan-Ocha, will put a draft constitution up for public vote on Aug. 7, paving the way for national elections scheduled next year. That may give investors more signals on the political and economic outlook for a nation hindered by sluggish growth and inflation close to zero.

 

Full story: https://www.bloomberg.com/news/articles/2016-08-03/thailand-keeps-benchmark-rate-unchanged-ahead-of-referendum

 

-- Bloomberg 2016-08-04

[Srikcir]

8 hours ago, webfact said:

opting to hold fire before an upcoming referendum

TRANSLATION:

opting to hold down the public's disappointments until after the referendum.

[elgordo38]

12 minutes ago, Srikcir said:

TRANSLATION:

opting to hold down the public's disappointments until after the referendum.

Maybe they have learned that cutting rates does not always boost prosperity i.e. Europe an Japan. They are both on a rocky road. The strong baht does not seem to be discouraging tourism if you believe government numbers. The TV members boots on the ground so to speak seem to paint a varying picture of the country's prosperity. It ain't over till the fat lady sings. 

[GOLDBUGGY]

On ‎8‎/‎4‎/‎2016 at 2:09 PM, elgordo38 said:

Maybe they have learned that cutting rates does not always boost prosperity i.e. Europe an Japan. They are both on a rocky road. The strong baht does not seem to be discouraging tourism if you believe government numbers. The TV members boots on the ground so to speak seem to paint a varying picture of the country's prosperity. It ain't over till the fat lady sings. 

Cutting Rates generally takes away demand from Government Bonds, which are considered among the most safest investments, and as a result of that it weakens that currency. That is considered desirable for Exporting Countries like Thailand, who also depend on Tourism to some extent.

 

Consider for a moment that Thailand Exports a lot of Rice. Like most Commodities Rice is traded in world wide markets in US Dollars, as is Oil and Gold. If the Thai Baht is weak and at 40 Baht to 1 USD and a Thai Farmer has Z amount of Rice to sell, then he would receive Z x $ x 40 Baht. If the Thai Baht is strong and now at 30 Baht to USD he will now receives Z x $ x 30 Baht.

 

So as you can see, and based only on the strength of the currency, the Thai Farmer ends up with a lot less money for the same amount of harvest. With less money in hand he has less to spend also, so he buys less. This in turn effects others in manufactories like hardware, truck sales, and appliances.  Thus starts the vicious cycle and a slow down in the economy and the layoff of factory workers.

 

I do agree that a slight change in the currency will not be too discouraging to most tourists. I am sure many come here on a Tour Package which would included hotel, travel, and in many cases food in all inclusive packages. Where you will see a big difference in in the amount of money they will spend here.

 

I think most tourist travel with a said budget to spend above there tour package. If a person plans to spend $1,000 during his vacation here, and the exchange rate is 40 to 1, then he will send 40,000 Baht. However, if the exchange rate is poor, and at 30 to 1, and even if he still plans to spend his $1,000, he will only spend 30,000 Baht here this time. So as you can see that even using the same amount of money to spend in US Dollars, or Euros for that matter, he actually spends less caused by a poor exchange rates.  

 

High Exchange Rates only helps when you are traveling outside that country, when you have a lot of assets in Thai Baht which you want to sell and buy US Dollars or your own currency, and importing goods as they become cheaper. But generally most people would be effected by higher Importation Cost. But since Thailand has a high Importation Tax on most items, then by reducing this tax you can achieve the same result without effecting your currency.