Bank of Thai­land faces tough de­ci­sion

The Pak Banker - - FRONT PAGE -

BANGKOK: The Bank of Thai­land will face a tough pol­icy de­ci­sion, while South Kore will re­lease its fourth-quar­ter growth re­port and Ja­pan of­fers up an in­fla­tion read­ing in a hol­i­day short­ened week. On Wed­nes­day the BoT will weigh in on mon­e­tary pol­icy, faced with choos­ing be­tween cut­ting in­ter­est rates to bol­ster a flag­ging econ­omy or keep­ing them on hold amid ris­ing con­cerns about debt lev­els.

Moody's An­a­lyt­ics ex­pects the BOT to stand pat with its cur­rent 1.5 per­cent bench­mark rate. "The Thai econ­omy is off to a poor start in 2016. Weak ex­ter­nal de­mand con­tin­ues to be a drag on ex­ports. This is hit­ting ex­port-ori­ented man­u­fac­tur­ers, lead­ing to de­clin­ing in­dus­trial pro­duc­tion. The do­mes­tic econ­omy is not far­ing much bet­ter," it said in a note Fri­day. "While th­ese con­di­tions would sug­gest an eas­ing of mon­e­tary pol­icy, we think this is un­likely. There are ris­ing con­cerns about pri­vate debt lev­els, which would only be ex­ac­er­bated by lower in­ter­est rates."

"Price pres­sures are dis­si­pat­ing across Ja­pan as oil prices con­tinue to fall while growth re­mains elu­sive," it said. The Bank of Ja­pan (BOJ) has strug­gled to boost the econ­omy out of de­fla­tion and to­ward a 2 per­cent in­fla­tion tar­get, turn­ing on Jan­uary 29 to a neg­a­tive in­ter­est rate pol­icy to en­cour­age banks to lend more. The min­utes of the BOJ meet­ing in Jan­uary, re­leased last week, showed that some mem­bers of the mon­e­tary pol­icy com­mit­tee were con­cerned the in­fla­tion tar­get wouldn't be reached within the fore­cast pe­riod of early 2017.

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