Thailand
central banking news:
Annual symposium,
possible change in inflation target, delay in MPC appointment
By Jon Fernquest
After the 1997 Asian economic crisis, the Bank of
Thailand formulated a new long-term anti-inflationary monetary
policy that the central bank has adhered to
without wavering to this day.
Since year 2000 the target of monetary policy has been to keep core inflation within a range of zero to 3.5% over the next two years.
The consumer price index measures the general level of prices for goods that households buy.
Core inflation is just the consumer price index without energy and fresh food goods which usually have more volatile prices than other goods.
The central bank is considering switching to using the consumer price index (headline inflation) instead of core inflation because core inflation has lagged headline inflation.
Production prices increased at a double digit pace in August (22% year-on-year) which clearly shows that there are inflationary pressures despite a recent decline in oil prices.
(Photo on right was taken during the BOT's annual economics symposium)
BOT's annual economics symposium
The bank of Thailand held it's annual economic symposium last week. Thailand's experience with inflation during the 1970s and 80s was discussed:
Among other central bank research presenters, Roong Mallikamas, a Monetary Policy Analysis and Strategy Division executive, said easing monetary policy was probably behind the lingering high inflation in Thailand from 1970 to 1980, when there was no significant oil shock.In the 1970s, Thailand's monetary policy was tied to that of the United States in the form of a peg against a basket of currencies dominated by the dollar. "Inflation, as it is now, was driven by both demand and supply factors on commodities," Ms Roong said.
"Therefore, monetary and fiscal discipline should be in place to avoid inflation expectations and tolerance, which will feed inflation. We should regard the potential economic growth rate from the perspective of the output gap."
Whether monetary policy should place emphasis on economic growth or fighting inflation over the long-term was discussed:
But Porametee Vimolsiri, an adviser to the National Economic and Social Development Board, argued that monetary policy should place more weight on economic growth."Whenever inflation dampens domestic demand and prices stay put, entrepreneurs will shoulder the burden. The Central Bank should ensure that its policy goes in the same direction as fiscal policy," he said.
The fact that China's economic growth will primarily be driving inflation over the next few years has raised questions about whether the central bank should adjust its monetary policy target, he added.
Finally, the role of exchange rates in monetary policy was also discussed:
Ranchana Pongsaparn, an economist at the central bank, said the baht would be an efficient tool to curb inflation if inflationary pressure was driven by import prices. The interest rate is currently the most effective tool.
(Read some papers presented at the symposium and the symposium announcement)
Delay in Monetary Policy Committee appointment
The Monetary Policy Committee (MPC), the group that meets every six weeks to direct Thailand's monetary policy, has still not been appointed even though the next meeting is scheduled for October 8. A new Bank of Thailand Act took effect six months ago which meant that the tenure of the current MPC expired at the end of August.
Once the BOT board of directors has been approved, the MPC will be appointed. The central bank governor will serve as chairperson of the MPC. The rest of the MPC will consist of two deputy governors and four experts in economics and banking. The MPC will set the monetary policy target in collaboration with the government and report to the cabinet every six months.
(Source #1:
Bangkok Post, business, 05-08-09, temp-link)
(Source #2: Bangkok Post, business, PARISTA
YUTHAMANOP, 04-09-08, temp-link)
(Source #3: Bangkok Post, business, 08-09-08, temp-link)
Vocabulary:
monetary policy - controlling the growth and stability of an economy by controlling the supply of money, availability of credit and loans, and the cost of money (interest rate) (See Wikipedia) นโยบายการเงินการคลังadhered to X - follow rule X, act in the way that rule X says you should act ยึดตาม
wavering - cannot decide about something, change mind frequently (การตัดสินใจ) ที่แกว่งไปมา
core inflation - inflation excluding food and energy prices (See Wikipedia)
Consumer Price Index (CPI) - Consumer Price Index (CPI) - a measure of what it costs households to buy the goods they need everyday to live (See Wikipedia) ดัชนีค่าครองชีพ
volatile - moving up and down suddenly and unexpectedly เปลี่ยนแปลงอย่างทันทีทันใดและโดยคาดการณ์ไม่ได้
headline inflation - the inflation measured by the consumer price index
inflationary pressures - factors in the economy pushing the general price level up ปัจจัยต่างๆ ที่ส่งผลให้ราคาสินค้าและต้นทุนการผลิตสูงขึ้น
tenure - the period of time spent in a position or government office ในระยะเวลาที่ดำรงตำแหน่ง
expired - ended สิ้นสุด
in collaboration with - working closely together with ทำงานร่วมกับ
easing monetary policy - lowering interest rates, making credit and loans easier for businesses to get ลดอัตราดอกเบี้ยเงินกู้เพื่อช่วยภาคธุรกิจ
lingering high inflation - high inflation that remains for long periods (once a country has high inflation, it is difficult to get rid of) ช่วงที่เกิดอัตราเงินเฟ้อต่อเนื่องเป็นเวลานาน
an oil shock - when world oil prices suddenly increase (this has a negatiev effect on the world economy because transportation and machines in facgtories rely on oil) ภาวะราคาน้ำมันในตลาดโลกพุ่งสูงขึ้นมากที่สุด
peg against a basket of currencies - the value of a currency is determined by the values of other currencies, each currency contributing a certain percentage (See Wikipedia on fixed exchange rates)
discipline - following rules and standards of behaviour, forcing others to follow these rules ปฏิบัติตามระเบียบข้อบังคับ
monetary and fiscal discipline - following rules in monetary and fiscal policy (for monetary policy this means sticking to the long-term inflation targeting policy decided on in the year 2000) ปฏิบัติตามนโยบายการเงินและเศรษฐกิจการคลัง
inflation expectations, inflationary expectations - การคาดคะเน
feed inflation - cause the rate of inflation to increase ทำให้อัตราเงินเฟ้อเพิ่มขึ้น
dampen - make less intense and less lively ทำให้หดหู่
stay put - not change or move คงที่ ไม่เปลี่ยนแปลง
entrepreneurs - business people เจ้าของกิจการ
shoulder the burden - have to pay the price or suffer when bad things happen รับภาระ
monetary policy committee (MPC) - the group of people at the BOT in charge of formulating monetary policy (Read description) คณะกรรมการนโยบายการเงิน