The trap is closing. Fast.
The US Fed, in total panic mode, has cut again yesterday by 0.5 at 3 %. Eight days after a cut of 0.75.
And apparently this new fix of dope had no real effect : Wall Street closed down last night.
And even worse, the Fed left the door open to more cuts by saying in its statement that “downside risks to growth remain“…
It means that interest rates in Thailand (3.25 %) are now higher than in the US.
The next meeting of the Monetary Policy Committee of the BOT is scheduled on february 27.
So what will happen now ? The downward pressure on USD, versus all the other currencies, especially the asian ones, is likely to increase.
And the BOT will continue to do what it did before : trying to curb the appreciation of THB, to save thai exports, by buying more and more of something that is loosing value every day : the US dollar (look at the ever increasing foreign currency reserves).
It’s the “walking-toward-the-cliff-with-a-smile” policy.
I really do hope that the new government will try to think out of the box this time.
It’s good to hear some thai voices (that’s new) that start to say that the current situation is not sustainable and that it might be a good idea to let the THB rise, in order to offset the energy bill and stimulate private investments throught imports.
Read for instance the article of Supavud (managing director for Phatra Securities) in Bangkok Post : “The Fed pumps liquidity into the financial market in the short term, but it risks credibility with higher inflation in the longer term. [Asian economies] should not tie their currencies with the dollar“.
The double-slasher was really a bold move by the FED. True it help alleviate the market wait tension, but this also emphasize a dire state of affair. Also any interest rate cut would take significant effect after 6 months, which could be too late.
BOT is really going deja vu of 1997 reverse-version, again pegging to USD. It is almost like we are virtually “subsidizing” the export sector…
Would this government have the gut to lift the 30% cap control and take the plunge? Finance ministry seat is definitely getting hotter…
I believe that nobody is learning… Look for instance at such astonishing headline :
“SET rallies on reports of new cabinet line-up”
The Stock Exchange of Thailand (SET) has surged by almost 15 points upwards — opposite to the Dow Jones Industrial Average — in Thursday’s morning trading session, boosted by news reports that the list of new cabinet members would be released soon.
http://enews.mcot.net/view.php?id=2583
I mean what’s the point ? Europeans markets are falling this morning among many bad news. And because of the FED drama.
So it’s almost a sure bet : SET will be in the red tomorrow.
But yet, the show must go on ! We are so proud. We have a new-old government, yeepee, everything is rozy now, everything is fine. Samak will save us.
I mean : it’s totally pathetic.
My point : people are stupid. That’s the core of the issue. Unfortunatly.
Give them TV, booze and some tits, and they will show just what they are : living organisms with a minimum brain for vital functions.
Therefore : no hope.
[okay, okay, I agree, I'm in a bad mood today
]
All,
Thailand is being severely affected by the current crisis. Despite dependent on export, our economic fundamental is different from those of Singapore and China.
Theoretically, Thailand should raise interest rate to curb the current spiraling inflation that is hurting most people in the country. But the Thais are not like the Singaporeans, Chinese, or Malaysians. Most of the Thais are indebted badly as a result of Thaksin’s highly-politicized consumption stimulus in the past 6 years. Many people from the middleclass to poor have lavished money with Japanese credit card and personal loans on imported Chinese goods and Japanese cars. Raising interest rate at this time will surely hurt these people. Social problems will follow.
Don’t expect that the new government will perform. It will resume Thaksin’s notorious pump-priming scheme to stimulate the consumption and please the grassroots instead of improving the country’s badly needed infrastructure. Therefore, raising interest rate is probably out of sight for now.
I am rather in support of raising interest rate than procrastinating, which will cost Thailand more later on.