Bank of Thai­land sur­prises with rate rise

The Pak Banker - - Company& -

BANGKOK: Thai­land's cen­tral bank sur­prised fi­nan­cial mar­kets on Wed­nes­day by rais­ing its bench­mark in­ter­est rate 25 ba­sis points to 2.0 per­cent and made it clear there would be fur­ther tight­en­ing to curb in­fla­tion, push­ing up the baht.

Most econ­o­mists had ex­pected no change be­cause of un­cer­tainty about the global econ­omy and the like­li­hood of higher rates mak­ing the cur­rency even stronger, when ex­porters were al­ready com­plain­ing they were no longer com­pet­i­tive.

The cen­tral bank said the econ­omy was ex­pected to grow next year due to ro­bust do­mes­tic de­mand, and re­peated that keep­ing rates low for too long would cause prob­lems.

Econ­o­mists said its state­ment was sur­pris­ingly hawk­ish. "We keep our fore­cast of fur­ther rate rises, it's just a mat­ter of time.

If the baht is not too strong and cap­i­tal in­flows are not heavy, we think they may grad­u­ally in­crease rates next year by at least an­other 75 ba­sis points," said Thanom­sri Fon­garun­rung, an econ­o­mist at Pha­tra Se­cu­ri­ties.

The baht rose to 30.02 per dol­lar af­ter the rate de­ci­sion, against 30.09/14 be­fore­hand. Five-year Thai govern­ment bond yields TH5YT=RR rose about 5 ba­sis points to 3.05 per­cent.

The cen­tral bank had kept the rate steady at its pre­vi­ous meet­ing in Oc­to­ber, paus­ing af­ter in­creases in July and Au­gust that had taken the rate to 1.75 per­cent from a record low of 1.25 per­cent main­tained since April 2009 to help the econ­omy re­cover from the global eco­nomic cri­sis. -PB News

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