JavaScript is off. Please enable to view full site.

Thai central bank to deliver third straight 25bps hike on Nov. 30

Thai central bank to deliver third straight 25bps hike on Nov. 30

Monday, November 28, 2022, 09:06 GMT+7
Thai central bank to deliver third straight 25bps hike on Nov. 30
Thailand's central bank is seen at the Bank of Thailand in Bangkok, Thailand April 26, 2016. Photo: Reuters

The Bank of Thailand will raise interest rates by a modest quarter-point on Wednesday for a third straight meeting amid fragile tourism-reliant growth and signs inflation has started to ease, a Reuters poll of economists found.

The widely-expected move, which would take the benchmark rate to only 1.25%, constitutes one of the tamest central bank tightening campaigns in the world, underscoring ongoing worries about growth in Southeast Asia's second-largest economy.

Thailand's economy has lagged its regional peers and was not expected to return to pre-pandemic levels until early next year as its vital tourism sector, which makes up about 12% of output, has only just started to rebound.

With the slowest pace of inflation in six months in October, helped by government measures to ease the cost of living, BOT Governor Sethaput Suthiwartnarueput has said it is not necessary to aggressively increase rates to manage inflation like in other countries.

All but two of the 19 economists in the Reuters Nov. 21-25 poll expect the BOT to raise its benchmark one-day repurchase rate (THCBIR=ECI) by 25 basis points to 1.25% at its Wednesday meeting. The remaining two predict rates will remain unchanged.

"We expect a relatively more modest recovery of the Thai economy and hence a less aggressive BOT compared to the rest of major and regional central banks on the back of easing inflation which may result in rather persistent weakness in the Thai baht," said Enrico Tanuwidjaja, an economist at UOB.

"Negative real interest rates will continue to favour the Thai economic recovery as it diverges away from an ultra-tight monetary policy elsewhere in the world, most notably in the U.S. and Europe."

The U.S. Federal Reserve has increased rates by 375 basis points so far in this cycle, with 75 basis point moves at the last four meetings and another 50 due in December.

Despite the wide interest rate gap, the baht has been one of the top performers in emerging market currencies, depreciating only about 7% so far this year.

"External pressure on the BOT to be more assertive with rate hikes has also eased after the recent retreat in the dollar," said Krystal Tan, economist at ANZ.

"Capital inflows have returned to its domestic bond and equity markets in the month-to-date, and the decline in foreign exchange reserves has started to reverse."

A weak currency is generally considered positive for the tourism-dependent Thailand economy.

In the year before the pandemic, 40 million tourists visited the country, which has a population of 70 million. The government wants tourism next year to reach 80% of its pre-pandemic levels, even as global growth is likely to slow.

"We expect Thai international tourism arrivals to be resilient to the global economic slowdown, with arrivals showing low sensitivity to global economic activity fluctuations historically," said Chua Han Teng, economist at DBS.

The Bank of Thailand will raise interest rates by a modest quarter-point on Wednesday for a third straight meeting amid fragile tourism-reliant growth and signs inflation has started to ease, a Reuters poll of economists found.

The widely-expected move, which would take the benchmark rate to only 1.25%, constitutes one of the tamest central bank tightening campaigns in the world, underscoring ongoing worries about growth in Southeast Asia's second-largest economy.

Thailand's economy has lagged its regional peers and was not expected to return to pre-pandemic levels until early next year as its vital tourism sector, which makes up about 12% of output, has only just started to rebound.

With the slowest pace of inflation in six months in October, helped by government measures to ease the cost of living, BOT Governor Sethaput Suthiwartnarueput has said it is not necessary to aggressively increase rates to manage inflation like in other countries.

All but two of the 19 economists in the Reuters Nov. 21-25 poll expect the BOT to raise its benchmark one-day repurchase rate (THCBIR=ECI) by 25 basis points to 1.25% at its Wednesday meeting. The remaining two predict rates will remain unchanged.

"We expect a relatively more modest recovery of the Thai economy and hence a less aggressive BOT compared to the rest of major and regional central banks on the back of easing inflation which may result in rather persistent weakness in the Thai baht," said Enrico Tanuwidjaja, an economist at UOB.

"Negative real interest rates will continue to favour the Thai economic recovery as it diverges away from an ultra-tight monetary policy elsewhere in the world, most notably in the U.S. and Europe."

The U.S. Federal Reserve has increased rates by 375 basis points so far in this cycle, with 75 basis point moves at the last four meetings and another 50 due in December.

Despite the wide interest rate gap, the baht has been one of the top performers in emerging market currencies, depreciating only about 7% so far this year.

"External pressure on the BOT to be more assertive with rate hikes has also eased after the recent retreat in the dollar," said Krystal Tan, economist at ANZ.

"Capital inflows have returned to its domestic bond and equity markets in the month-to-date, and the decline in foreign exchange reserves has started to reverse."

A weak currency is generally considered positive for the tourism-dependent Thailand economy.

In the year before the pandemic, 40 million tourists visited the country, which has a population of 70 million. The government wants tourism next year to reach 80% of its pre-pandemic levels, even as global growth is likely to slow.

"We expect Thai international tourism arrivals to be resilient to the global economic slowdown, with arrivals showing low sensitivity to global economic activity fluctuations historically," said Chua Han Teng, economist at DBS.

Reuters

More

Read more

Missing radioactive capsule found in Western Australia

Australian authorities on Wednesday found a radioactive capsule that was lost in the vast Outback after nearly a week-long search along a 1,400 km (870-mile) stretch of highway, an emergency services official said

13 hours ago
;

Photos

VIDEOS

‘Taste of Australia’ gala dinner held in Ho Chi Minh City after 2-year hiatus

Taste of Australia Gala Reception has returned to the Park Hyatt Hotel in Ho Chi Minh City's District 1 after a two-year hiatus due to the COVID-19 pandemic

Vietnamese woman gives unconditional love to hundreds of adopted children

Despite her own immense hardship, she has taken in and cared for hundreds of orphans over the past three decades.

Vietnam’s Mekong Delta celebrates spring with ‘hat boi’ performances

The art form is so popular that it attracts people from all ages in the Mekong Delta

Vietnamese youngster travels back in time with clay miniatures

Each work is a scene caught by Dung and kept in his memories through his journeys across Vietnam

Latest news

Missing radioactive capsule found in Western Australia

Australian authorities on Wednesday found a radioactive capsule that was lost in the vast Outback after nearly a week-long search along a 1,400 km (870-mile) stretch of highway, an emergency services official said