Surprise : the BOT raises interests rates by 0,25 point

Where do I have my head ? With all the nervousness nowadays in Bangkok… I totally forgot the… meeting of the BOT. 😉

Surprise, surprise… They increased interest rates by 0,25 point, like in july (read here).

The Monetary Policy Committee on Wednesday resolved to raise the policy rate by a quarter percentage point to 3.75 per cent.

Bank of Thailand Assistant Governor Duangmanee Vongpradhip said after the MPC meeting that despite the recent declines, oil prices remain volatile and pose risks to prices. She noted that the six government measures to ease oil price impacts would also be in place for just six months.

She also noted that the central bank would monitor the political unrest to see if the incidents would pose long-term threats to confidence.

She said that the unrest has been continued for some time, as without bloodshed, it would not affect the confidence in the long term. (Nation)

A few comments :

-even at 3,75 %… we still have negative real interest rates (see chart there). I mean we do have a high inflation (9,2 % in july, year on year). Therefore, it’s not enough.

People can talk about prices inflation versus wages inflation, or money supply…. or say that interests rates have no effect in such environment… Bullshit.

You want the prices to go down ? Reduce the demand. Period.

High interests rates will do the job.

The party is over. Too many cars, too many empty condos and houses, too many stupid “boost policies”, too much money given away…

-inflation of prices is fueled also… by exchange rate. The THB is weakening, therefore the prices of imported goods are going up. The best proof is the record high imports in july, and the trade deficit. Higher interest rates should boost the THB.

-It’s a good surprise. The BOT is showing a nice moral strenght by confronting the government (all the clowns want of course interest rates at 0 % to “boost“… the economy… I mean their own political future). 😉

The recent speech of the King (moral support) has certainly helped (read here).

-and the BOT is right to say that the “6 months relief package” from the gvt (tax cuts on diesel, gasohol etc.) … well… will last… 6 months only. That’s the point of such stupid policy. 😉

It’s just a quick fix of feel-good-medecine.

But the government is so obsessed by the short term (its very own survival) than it can’t imagine something else.

And the people are so obsessed by their cars (or their wannabe cars) that they can’t think straight.

The awakening might be painful…

5 Responses to “Surprise : the BOT raises interests rates by 0,25 point”


  1. 1 fdl 27 August 2008 at 1:58 pm

    That was surprise . . . and BOT was sneaky too with that rate raise almost unnoticed because of the insane ruckus of the PAD that was getting all the attention.

    I agree with you that the increase won\’t make a dent . . but it sends a message hopefully that BOT won\’t allow runaway inflation to be the master of us all.

    Have you bought your gold bars yet ThaiCrisis? With nearly all the governments of the world still growing their money supply/financial credit like crazy . . . what better safe haven other than gold?

  2. 2 ThaiCrisis 27 August 2008 at 3:06 pm

    I do own some gold. 😉

    But honestly I don’t have a clue. The current situation is so totally atypical.

    I follow the heated discussion between the supporters of hyper inflation and the supporters of hyper deflation.

    And I count the points.;-)

  3. 3 fdl 28 August 2008 at 12:48 am

    Usually hyperinflation hit first like a left hook to our chin followed by hyperdeflation muay Thai kick to our guts to make sure we are down for the full count.

    I tend to subscribe to the tenet that it is better to quickly take all the economic pain in one gulp, rather than a slow strangling suffocation that keep every gasping at near eternity, when governments continue to hold off the inevitable by keeping a loose grip on the money spigot. That means raise the interest rates when the threat of hyperinflation knocks.


  1. 1 BKK News Feed Archive - Q3/08 Trackback on 28 August 2008 at 1:36 am
  2. 2 Interest rates are moving on up… at The FARANG Speaks 2 Much Trackback on 28 August 2008 at 3:56 am

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Thailand Crisis

Coup, Economic slowdown, Terror In the South... The situation is worsening in Thailand. Bumpy road like often before.

But this time, it's different.

The key to understand the present turmoil is the inevitable... succession of King Bhumibol.


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