Thailand's monetary policy may tighten over the next year
By Jon Fernquest
Monetary policy in Thailand
has been steady with one unchanging central
bank benchmark interest rate since last year. Now there is talk of an interest rate hike by the Bank of Thailand sometime over the course of the next year.
The recovery from the 2008 global recession has brought with it inflationary pressure.
High and unpredictable inflation can have many negative effects on an economy:
1. Rapidly changing prices can make it difficult for companies and households to budget and plan long-term.
2. Life becomes especially difficult for older retired people on fixed incomes whose income does not keep pace with inflation.
3. There can also be a negative effect on exchange rates and the country's exports, foreign trade and investment (See Wikipedia).
Today's article begins after the vocabulary:
monetary policy - the
policy of the
central bank in influencing the cost and availability of credit through
interest rates and other measures, with the goals of promoting economic
growth, full employment, price stability and balanced trade with other
countries (See Google
definitions)
Bank of Thailand (BoT) - Thailand's central bank (See (See website)
tighten monetary policy, contractionary monetary policy - when increases in central bank interest rates, decreases in money supply and/or increases in reserve requirements have a contractionary effect on the economy, but also helps reduce and control inflation long-term (See Wikipedia)
central bank - a government monetary authority in charge of monetary policy, issues currency, regulates supply of loans and credit, holds the reserves of other banks and foreign currencies
(See Wikipedia)
interest rate - a percentage of the total amount loaned by a bank that it charges as a fee (interest) for borrowing money (the principal)
interest 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
benchmark - a standard that other things can be compared to and measured by
benchmark rate, benchmarch interest rate - the interest rate that the MPC sets as part of monetary policy, other interest rates are tied to and guided by this rate
interest rate hike - increase the interest the central bank uses to control monetary policy
over the course of the next year - during the time period of next year
recovery - when the economy gets better (more jobs, higher incomes) การฟื้นฟูสภาพ
global - throughout the world ทั่วโลก
recession - a period of reduced economic activity and growth with lots of unemployment, starts with at least two quarters of negative GDP growth ภาวะเศรษฐกิจถดถอย (See Wikipedia and list of recessions in US)
inflationary pressure - when prices start to rise again when the economy, employment and incomes start increasing rapidly during the recovery from an economic downturn
keep pace with - move at the same speed as, move more slowly than
Bank of Thailand (BoT) - Thailand's central bank (See (See website)
tighten monetary policy, contractionary monetary policy - when increases in central bank interest rates, decreases in money supply and/or increases in reserve requirements have a contractionary effect on the economy, but also helps reduce and control inflation long-term (See Wikipedia)
central bank - a government monetary authority in charge of monetary policy, issues currency, regulates supply of loans and credit, holds the reserves of other banks and foreign currencies
(See Wikipedia)
interest rate - a percentage of the total amount loaned by a bank that it charges as a fee (interest) for borrowing money (the principal)
interest 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
benchmark - a standard that other things can be compared to and measured by
benchmark rate, benchmarch interest rate - the interest rate that the MPC sets as part of monetary policy, other interest rates are tied to and guided by this rate
interest rate hike - increase the interest the central bank uses to control monetary policy
over the course of the next year - during the time period of next year
recovery - when the economy gets better (more jobs, higher incomes) การฟื้นฟูสภาพ
global - throughout the world ทั่วโลก
recession - a period of reduced economic activity and growth with lots of unemployment, starts with at least two quarters of negative GDP growth ภาวะเศรษฐกิจถดถอย (See Wikipedia and list of recessions in US)
inflationary pressure - when prices start to rise again when the economy, employment and incomes start increasing rapidly during the recovery from an economic downturn
keep pace with - move at the same speed as, move more slowly than
Economics
Business can absorb a rate hike this year, says Tarisa
But FTI wants cap until year-end15/06/2010
Parista Yuthamanop and Nanchanok Wongsamuth
The Bank of Thailand is expected to raise its key interest rate at least once this year but it should not affect business costs, says governor Tarisa Watanagase.
An increase in the one-day repurchase interest rate could be needed to curb inflationary pressure driven by the recovery from the 2008 global recession.
absorb
- adjust to some negative effect without being hurt or damaged by it
rate - interest rate
cap - a limit (set largest amount that it cannot go beyond, cannot go above this level, like a "cap" on a jar)
expected - believe will happen คาดว่า (จะเกิดขึ้น)
key - important คนสำคัญ
one-day repurchase interest rate - the key interest rate that the Thai central bank uses in monetary policy
curb - to control or limit something that is harmful ระงับ, ควบคุม
pressure - a force causing change
recovery - when the economy gets better (more jobs, higher incomes) การฟื้นฟูสภาพ
global - throughout the world ทั่วโลก
recession - a period of reduced economic activity and growth with lots of unemployment, starts with at least two quarters of negative GDP growth ภาวะเศรษฐกิจถดถอย (See Wikipedia and list of recessions in US)
rate - interest rate
cap - a limit (set largest amount that it cannot go beyond, cannot go above this level, like a "cap" on a jar)
expected - believe will happen คาดว่า (จะเกิดขึ้น)
key - important คนสำคัญ
one-day repurchase interest rate - the key interest rate that the Thai central bank uses in monetary policy
curb - to control or limit something that is harmful ระงับ, ควบคุม
pressure - a force causing change
recovery - when the economy gets better (more jobs, higher incomes) การฟื้นฟูสภาพ
global - throughout the world ทั่วโลก
recession - a period of reduced economic activity and growth with lots of unemployment, starts with at least two quarters of negative GDP growth ภาวะเศรษฐกิจถดถอย (See Wikipedia and list of recessions in US)
Dr Tarisa said yesterday that an increase in interest rates should not slow economic growth and that the private sector could make investment plans more effectively by factoring in the likelihood of higher rates.
Whether local commercial banks raise their lending rates in response to a central bank increase would depend on each bank's liquidity and lending strategy, she said.
sector
- a part of the economy (public sector = government,
private sector = all businesses, household sector = families and
consumers, banking sector,...) (See Wikipedia)
ภาค (เศรษฐกิจ)
private sector - all the businesses in an economy
investment - taking your money and putting it into projects to make a profit or earn interest (buying stock shares, bonds, real estate)
effectively - working well and producing the results that they wanted
factoring in Y - dealing with problem or issues Y when making a decision
likelihood - the chance that something will happen ความเป็นไปได้
local - in or related to the area that you live, or to the particular area that you are talking about ท้องถิ่น
commercial - for business purposes
commercial banks - a bank or a division of a bank primarily dealing with deposits and loans from corporations or large businesses (See Wikipedia)
lending - giving money to someone who agrees to pay it back in the future การให้ยืม
lending rates - interest rates, the amount of money that a bank charges for letting people use their money
liquidity - have or able to get the cash needed to operate and meet obligations สภาพคล่อง
strategy - long-term plans to achieve goals
private sector - all the businesses in an economy
investment - taking your money and putting it into projects to make a profit or earn interest (buying stock shares, bonds, real estate)
effectively - working well and producing the results that they wanted
factoring in Y - dealing with problem or issues Y when making a decision
likelihood - the chance that something will happen ความเป็นไปได้
local - in or related to the area that you live, or to the particular area that you are talking about ท้องถิ่น
commercial - for business purposes
commercial banks - a bank or a division of a bank primarily dealing with deposits and loans from corporations or large businesses (See Wikipedia)
lending - giving money to someone who agrees to pay it back in the future การให้ยืม
lending rates - interest rates, the amount of money that a bank charges for letting people use their money
liquidity - have or able to get the cash needed to operate and meet obligations สภาพคล่อง
strategy - long-term plans to achieve goals
The central bank's Monetary Policy Committee has kept its benchmark rate steady at 1.25% since June last year.
At its most recent meeting early this month it left the rate unchanged, citing concern about the impact of local political unrest, and the possible threat of the European public debt crisis to the global economic recovery.
Monetary Policy
Committee (MPC) -
the group of people in the central bank that make monthly decisions on
Thailand's monetary policy คณะกรรมการนโยบายการเงิน
kept steady - keep at same level (without letting it go up or down very much)
meeting - when a group of people come together to discuss issues and make decisions การประชุม
citing - mentioning as a reason ให้ อ้างอิงเหตุผล
concern - a worry ความกังวล
impact - an effect or influence ผลกระทบ
political unrest - political problems involving protest, riots, violence and/or insurgency
threat - a danger อันตราย
debt - an amount of money that you owe หนี้
crisis - an urgent, difficult or dangerous situation วิกฤต
public debt crisis - when the amount of money that the government is too large, so people believe it may not be paid back, this leads to higher interest rates, and makes it even more difficult for the government to pay the money back
kept steady - keep at same level (without letting it go up or down very much)
meeting - when a group of people come together to discuss issues and make decisions การประชุม
citing - mentioning as a reason ให้ อ้างอิงเหตุผล
concern - a worry ความกังวล
impact - an effect or influence ผลกระทบ
political unrest - political problems involving protest, riots, violence and/or insurgency
threat - a danger อันตราย
debt - an amount of money that you owe หนี้
crisis - an urgent, difficult or dangerous situation วิกฤต
public debt crisis - when the amount of money that the government is too large, so people believe it may not be paid back, this leads to higher interest rates, and makes it even more difficult for the government to pay the money back
The MPC aims to keep core inflation, which excludes raw food and energy prices, in a range of 0.5% to 3% over the next eight quarters.
While the central bank believes businesses could handle a rate increase, the Federation of Thai Industries (FTI) wants it to keep rates on hold for the rest of the year because the local recovery is still fragile.
core
- the most important or most basic part of something ส่วนสำคัญ, แก่น
สิ่งที่สำคัญที่สุด
inflation - the level of prices rising in the economy as a whole (See Wikipedia and The Economist glossary) ภาวะเงินเฟ้อ, อัตราเงินเฟ้อ
core inflation - a measure of inflation excluding goods with volatile price movements, such as food and energy (See Wikipedia and article at Economist's View blog on possible confusions over the term)
raw - materials in their natural state before being processed or used in manufacturing
raw - not cooked
raw food - food before it is cooked and prepared for eating in a restaurant or at home
energy prices - prices of oil, coal and natural gas used to fuel cars and other transportation as well as generate electricity and heat for cooking
in a range of X to Y - numbers between X and Y
fragile - easy to break or damage ที่เปราะบาง ที่หักง่าย
inflation - the level of prices rising in the economy as a whole (See Wikipedia and The Economist glossary) ภาวะเงินเฟ้อ, อัตราเงินเฟ้อ
core inflation - a measure of inflation excluding goods with volatile price movements, such as food and energy (See Wikipedia and article at Economist's View blog on possible confusions over the term)
raw - materials in their natural state before being processed or used in manufacturing
raw - not cooked
raw food - food before it is cooked and prepared for eating in a restaurant or at home
energy prices - prices of oil, coal and natural gas used to fuel cars and other transportation as well as generate electricity and heat for cooking
in a range of X to Y - numbers between X and Y
fragile - easy to break or damage ที่เปราะบาง ที่หักง่าย
Small and medium size-enterprises in particular would have trouble absorbing higher costs, said FTI chairman Payungsak Chartsutthipol.
I don't know when there will be an increase [in interest rates], but maintaining the rate should help with production costs, which will help them compete with overseas competitors," he said.
In a related development, Dr Tarisa said local corporate overseas funding costs, gauged by the corporate default swap (CDS) spread, had declined from the height of political unrest in May.
enterprises
- companies
Small and medium size-enterprises - SMEs
absorbing higher costs - paying higher costs for borrowing money and still running a profitable business
In a related development,... - in another event that happened that is related to the story we were just talking about...
funding - money given for a particular purpose การให้เงินสนับสนุน
local corporate overseas funding costs - money paid in a foreign currency (not the baht) for loans from foreign banks
X gauged by Y - X measured by Y, finding out what X is by looking at Y
Credit Default Swap (CDS) - (See Wikipedia)
default - failure to repay a debt การผิดสัญญา
spread - the difference between two interest rates or rates of return
corporate default swap (CDS) spread -
Small and medium size-enterprises - SMEs
absorbing higher costs - paying higher costs for borrowing money and still running a profitable business
In a related development,... - in another event that happened that is related to the story we were just talking about...
funding - money given for a particular purpose การให้เงินสนับสนุน
local corporate overseas funding costs - money paid in a foreign currency (not the baht) for loans from foreign banks
X gauged by Y - X measured by Y, finding out what X is by looking at Y
Credit Default Swap (CDS) - (See Wikipedia)
default - failure to repay a debt การผิดสัญญา
spread - the difference between two interest rates or rates of return
corporate default swap (CDS) spread -
The hedging instrument premium fell to 142 basis points over the past week, compared to 176 in May. But the cost of hedging instruments has not returned to the 90 basis points seen in early this year, she said.
Investors and foreign financial institutions are becoming more confidence in the local political outlook, she said.
She maintained that an increase in the CDS spread so far this year had not affected the private sector because there is high liquidity in the local market
She also noted that the spreads for other countries in the region had increased since the beginning of the year
Last week, Hong Kong's CDS spread stood at 59, China 94, Malaysia 112, Indonesia 193, the Philippines 180, South korea 143 and Japan 98 basis points
hedging
- reducing risk by purchasing other offsetting risks
(securities with prices that move in the opposite direction, for
example) (See The
Economist glossary)
instrument - an investment such as stock shares, bonds, options or future bought and sold in some system
premium -
hedging instrument premium
basis points - one hundredth of one per cent (0.01), used to express differences in interest rates
institutions - large and important organizations, such as universities or banks สถาบัน
confidence - feel sure about something ความเชื่อมั่น, ความมั่นใจ
outlook - what people think will happen in the future อนาคตที่คาดไว้, ภาพรวม อนาคต
maintained - kept at the same level (not allowed to increase or decrease)
instrument - an investment such as stock shares, bonds, options or future bought and sold in some system
premium -
hedging instrument premium
basis points - one hundredth of one per cent (0.01), used to express differences in interest rates
institutions - large and important organizations, such as universities or banks สถาบัน
confidence - feel sure about something ความเชื่อมั่น, ความมั่นใจ
outlook - what people think will happen in the future อนาคตที่คาดไว้, ภาพรวม อนาคต
maintained - kept at the same level (not allowed to increase or decrease)
(Source: Business can absorb a rate hike this year, says Tarisa, But FTI wants cap until year-end, 15/06/2010, Parista Yuthamanop and Nanchanok Wongsamuth, link)
