Bank of Thailand likely to keep rate

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Bank of Thailand likely to keep rate 
: 17 Apr 2010
BoT likely to retain policy interest rate unchanged

BANGKOK, April 17 (TNA) – The Bank of Thailand (BoT) Monetary Policy Committee is expected to keep the policy interest rate unchanged at 1.25 per cent at its meeting on April 21 since it does not want to put more pressure on the country’s economic growth now, according to a leading think tank.

Kasikiorn Research Center reported that the MPC will meet for its third round this year to discuss the country's monetary policy direction, particularly that of the 1-day bilat repo rate which is considered Thailand’s policy interest rate.

The government earlier adopted easing monetary and fiscal policies on a continual basis since the economy recovered clearly. It saw no need to keep the interest rate low as inflationary pressure had mounted since early this year.

However, the think tank believed the ongoing political standoff remained complicated and hard to be addressed quickly. It had posed a grave threat to the country’s economic growth.

Simultaneously, the risk of inflation has not put enough pressure for MPC to rush to decide on the interest rate adjustment, so it is projected that the committee will maintain the policy interest rate at its upcoming meeting. Its decision to raise the interest rate to the normalised level will be made in due course.

In addition, KRC estimated the escalating political conflicts would make the country’s economic growth this year drop by around 0.2-1.5 per cent because the current standoff had undermined private-sector confidence, and dampened local spending in the tourism and service sectors.

In the worst-case scenario, the Thai economy might grow only 3.5 per cent this year if the political standoff were prolonged or the government were unable to implement its policy smoothly, but if Thailand's political conflicts were to be solved quickly, the economy might expand up to 6 per cent this year, said KRC. (TNA)

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Bank of Thailand rates unchanged 
Bangkok Post: 22 Apr 2010
One-day rate stays at 1.25%

The Bank of Thailand left short-term interest rates unchanged yesterday, citing domestic political instability as a key risk to economic recovery.

The decision by the central bank's Monetary Policy Committee leaves the one-day repurchase rate at 1.25%, a level held since April last year.

Paiboon Kittisrikangwan, a central bank assistant governor, said the move to keep rates unchanged was a direct result of the current political crisis.

"We are keeping interest rates unchanged as we assess the impact of the political situation. Once a clear assessment can be made, a move towards a normalisation of interest rates will likely be the next step," he said.

The decision was widely expected by the markets, given estimates that the tensions could cut growth this year by one to two percentage points from previous estimates of 4% to 5% growth.

Red-shirt protesters insist they will maintain their vigil at the Ratchaprasong intersection in a bid to force the Abhisit Vejjajiva government to call fresh elections, even as military leaders vow to prevent any spread of the protests to other key business areas in the capital.

A clash between the red shirts and security forces on April 10 left 25 dead and more than 800 injured, and has prompted concerns that tourism and investment will plummet for the rest of the year. But the MPC said that, excluding political risk, the Thai economy continues to rebound strongly.

"The Thai economy shows signs of robust growth in the first quarter, driven by continued growth in exports, consumption and investment. The global economic recovery, improved confidence in the private sector, and strong economic fundamentals should provide a foundation for firm economic expansion this year," the MPC said in a statement.

"Nonetheless, the heightened political risk is a key factor clouding the economic outlook at the moment."

Mr Paiboon said overall macroeconomic stability was strong, with inflation rates low, the financial sector strong and the current account showing strong surpluses.

But core inflation is set to rise with the economic recovery and an increase in raw material costs, a trend that analysts say would push the central bank to raise interest rates by up to a half a percentage point in the second half of the year.

The MPC sets monetary policy based on a target of keeping core inflation within a range of 0.5% to 3%. Last month core inflation, which excludes raw food and energy prices, stood at a modest 0.4% year-on-year.

Mr Paiboon said the central bank would announce its revised forecasts in its latest Inflation Report on April 29. The MPC is next scheduled to meet on June 2.

Meanwhile, a group of local businesses has submitted a petition to the central bank seeking assistance for losses resulting from the political protests.

Somboon Namtipjuntacharern, owner of the Isoptik eyewear centre, said he had lost more than 100,000 baht a day since the red shirts occupied the Ratchaprasong intersection early this month.

"The damages caused by the demonstrations are too much for small businesses. We don't know how much longer we can take it. Maybe only one or two weeks more," he said.

The group asked the central bank to persuade local banks to reschedule debt payments and to approve soft loans and provide other types of financial assistance.

Sorasit Soontornkes, a central bank assistant governor, said regulators would help co-ordinate the request with banks. "We can help co-ordinate the requests with the banks, but we cannot change any regulations," he said.

http://www.bangkokpost.com/business/economics/36439/one-day-rate-stays-at-1-25