Bank of Thailand defends interest rate policy
By Jon Fernquest
Interest rate hikes have been anticipated
for a long time.
Last month, the Bank of Thailand's Monetary Policy Committee (MPC) raised short-term benchmark rates for the first time in 13 months, by 0.25% to 3.5%.
Both in Thailand and countries around the world debate has raged over whether rate hikes or rate cuts are called for in the current global economic situation.
In the pages of the Bangkok Post there has been a debate over the effects of rate hikes and whether a contractionary monetary policy (rate hikes) or an expansionary monetary policy (rate cuts) is what the Thai economy needs right now. Economist Dr. Supavud Saicheua argued for rate hikes. Economist Dr. Virabongsa Ramangkura, recently appointed as an economic advisor to the current government, argued against rate hikes.
Inflation rearing its ugly head
Worldwide inflation is gathering speed and when inflation gathers momentum, it is hard to bring under control. Purchasing food and the other essentials for daily life becomes even more difficult for the poor if inflation really starts moving quickly.
Pain in the future always seems less painful than pain right now.
It is a little hard to imagine the pain of future inflation until you actually get there and experience it. Thailand hasn't experienced rapid inflation rates or hyperinflation for quite a long time.
Rate hikes consistent with Thailand's long-term monetary policy of inflation targeting would act to control inflation over the long-term.
Worldwide central banks are allowed autonomy and independence in decisionmaking so that they can maintain policies consistent with their long-term goals.
Central bank independence has become standard for banks worldwide as a way to fight short-term political interference with the long-term goals of monetary policy.
The most famous historical case of political interference is President Nixon's pressuring of then central bank (Fed) chairman Arthur Burns to relax monetary policy before the 1972 American presidential elections so that the economy wouldn't slowdown and Nixon could get reelected. This effect of elections on economic policy is called the political business cycle. (See conversations from Nixon tapes, paper, Econbrowser, Wikipedia, and another paper).
(Source: Bangkok Post, general news, Vichaya Pitsuwan, temp-link)
Vocabulary:
X anticipated - people believed that X was goign to happen คาดว่าจะเกิดขึ้นMonetary Policy Committee (MPC) - the group of people in the central bank that make monthly decisions on Thailand's monetary policy คณะกรรมการนโยบายการเงิน
short-term benchmark rates - การปรับ
rate hikes - when the central bank increases policy interest rates (contractionary, makes less credit and loans available, tends to reduce growth and reduce money supply in the long-term) การปรัีบตัวสูงขึ้นของอัตราดอกเบี้ย
rate cuts - when the central bank increases policy interest rates (expansionary, makes more credit and loans available, tends to increase growth and increase money supply in the long-term) การลดอัตราดอกเบี้ย
called for Y - Y was needed เป็นที่จำเป็น ถูกนำมาใช้
rearing its ugly head - said of something unpleasant that is starting to happen more often แสดงความเลวร้ายออกมา เผยให้เห็นผลกระทบที่เลวร้าย
gathers momentum - accelerating, going faster and faster (See glossary) เพิ่มขึ้นอย่างรวดเร็ว
hyperinflation - very high inflation rates that are out of control, very difficult to live or do business in such an economy, especially for the poor and for people on fixed incomes such as retired people (See Wikipedia) อัตราเงินเฟ้อที่สูงมากจนส่งผลกระทบต่อการดำเนินชีวิตและทำูธุรกิจของคนในประเทศ
consistent with - agrees with, goes together well with (doesn't contradict or violate logic) สอดคล้องกับ
monetary policy - the policy of a country's central bank controlling (i) the supply of money, (ii) availability of money, and (iii) cost of money or rate of interest, in order to attain a set of objectives oriented towards the growth and stability of the economy (See Wikipedia) นโยบายทางการเงิน
a contractionary monetary policy - a monetary policy that fights inflation but limits growth, increases in policy interest rates, in open market operations exchanging bonds for currency reducing the money supply and credit available in the economy (See Wikipedia) นโยบายเพิ่มอัตราดอกเบี้ย เพื่อปรับให้อัตราเงินเฟ้อลดลง
an expansionary monetary policy - the opposite to contractionary policy, an increase in the money supply and credit, tends towards faster growth in the short term at the expense of higher inflation in the long-term (See Wikipedia)
inflation targeting - the central bank monetary policy that adjusts interest rates to keep inflation in a target range (See Wikipedia) กำหนดเป้าหมายในการควบควมอัตราเงินเฟ้อ
autonomy - ability to make your own decisions rather than be influenced or controlled by someone else มีอำนาจอิสระในการกำหนดนโยบาย
independence - not being influenced by or dependent on other people เป็นหน่วยงานอิสระ
central bank independence - a theory that holds that a central bank is better able to carry out a long-term monetary policy such as inflation targeting if it is not influenced too much by short-term political decisions, it is argued that an independent central bank can run a more credible monetary policy, making market expectations more responsive to signals from the central bank (See Wikipedia)
political interference - when politicians try to influence decisions for their own gain, decisions which should be made independently for the benefit of everyone การแทรกแซงจากทางการเมือง
political business cycle - a pattern of pre-election boom and post-election economic slump ความเป็นไปของธุรกิจที่มักจะได้รับการกระตุ้นให้มีสภาพที่ดีก่อนการเลือกตั้งและซบเซาหลังการเลือกตั้งสิ้นสุดลง