Thailand: Veerathai softens the ground for future rate hike decisions

  • Bank of Thailand governor Veerathai Santiprabhob has reaffirmed that ultra-loose monetary policy is nearing an end, saying rate-setters will consider a suitable time to raise the policy rate after the necessity of accommodative monetary policy has dwindled.
  • There is less need now for an extremely accommodative stance from the Bank of Thailand since the recovery in the economy is clearer, governor Veerathai Santiprabhob told reporters. Thailand can’t go against the global trends in interest-rate policy, he said.
  • The Monetary Policy Committee (MPC) has signalled future hikes over the past two meetings after the US Federal Reserve’s benchmark rate of 1.75-2% exceeded Thailand’s policy rate, left unchanged at 1.5% since 15 Apr 18.
  • Hefty foreign reserves and sizeable current-account surplus has sheltered the currency from the worst of the emerging-market turmoil. Along with relatively benign inflation, that’s allowed the Bank of Thailand to stand pat on interest rates.
  • Mr Veerathai said central banks across the world have moved to normalise rates after hewing to an unconventional monetary policy over the past 10 years.
  • The rate hikes by major economies led by the Fed have sent currencies around the world, including the baht and other Asian denominations, into wild swings.
  • The monetary authority could raise borrowing costs for the first time since 2011 as early as its next policy meeting in Sep 18, Tim Leelahaphan an economist at Standard Chartered Bank in Bangkok, said in a Bloomberg Television interview. Nomura Holdings Inc continues to see a hold.

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