Chart, real interest rate and Minimum Lending Rate

The Bank Of Thailand is probably going to cut interest rates during its next meeting, on december 3 (read here), like many other central banks around the world.

Time to update the chart of… real interest rate (= BOT repurchase rate minus CPI).


It’s going up… But, it’s important to note that the decrease of the CPI (Consumer Price Index, at +3,9 % in october) is a little bit artificial (since august, we have the special “rescue package” decided by Samak, with heavy tax cuts on diesel, and other goodies… for 6 months, read here).

Right now, the repurchase rate is 3,75 %. The BOT could cut probably 0,50. Therefore, we will stay in negative territory.

Now, let’s have a look at the “real life”… What is the interest rate you would pay at your bank ? Here is an update of the MLR (Minimum Lending Rate) at the Bangkok Bank. Why the Bangkok Bank ? Because it’s the biggest thai bank.


9 Responses to “Chart, real interest rate and Minimum Lending Rate”

  1. 1 MSB 13 November 2008 at 3:33 am

    Statically true but MLR is rather misleading as its not actually the minium rate at which the banks lends.

    Most corporates can get MLR minus 100 to 200 basis points.

    I believe average lending rates (for all asset qualities) is about 6% with 5.25% the norm for above average credit at BBL.

  2. 2 ThaiCrisis 13 November 2008 at 5:13 am

    Are you sure MSB ? I mean for companies I could understand. They negociate.

    But for the average Joe ?

  3. 3 MSB 13 November 2008 at 9:08 am

    Even more so for the retail as their is more competition. You can get a car loan at 5% easy…

    But your point is valid that the spread is too wide. Actually banks would like to cut the deposit rate if they thought they can get away with it. So far no bank has broken the cartel.

    Yes my bank analyst is sure for the BBL ave rate.

  4. 4 FDL 13 November 2008 at 12:08 pm

    Getting a car loan for 5% easy???? Not very likely because
    bank deposit rate is at 3.5% and Thai bankers are notorious for usurious spreads. MLR for good medium-size Thai corporates should be 7.5% minimum (Siam Cement of course gets a lot lower rate).

    But I was looking at your chart TC and I noted that I have been getting a negative effective return on my bank balances for nearly a year now. Who can I sue? The Thai bank who I have given complete trust to protect my accumulated savings is actually stealing from me, without my knowledge????

  5. 5 MSB 14 November 2008 at 9:22 am

    Yeah a guy a work got a Fortuna at 5%

    As I said, most corps can get below MLR although SCC is not the credit it once was. Got booted from MSCI this week…

    Well count youself lucky with a small negative real rate of return from banks. you could have put it in the stock market and only be down 50% or so!

  6. 6 hoktula 14 November 2008 at 6:53 pm

    Whitehead sees slump worse than Depression
    Wed Nov 12, 2008
    ( )

    The economy faces a slump deeper than the Great Depression and a growing deficit threatens the credit of the United States itself, former Goldman Sachs chairman John Whitehead, said at the Reuters Global Finance Summit on Wednesday.

    Gold rush
    Nov 14th
    ” China considering buying more gold for its reserves. The mainland is seriously considering a plan to diversify more of its massive foreign-exchange reserves into gold ”
    ( thestandard. com )

    so, everybody is holding breath till after G20 summit in NY this weekend.

    Gold to Break to Upside, Dollar to Collapse
    Nov 13

    “not only that gold is about to erupt to the upside, but also that the market smells the endgame for the dollar fast approaching too.

    There’s no way around the fact that the dollar will collapse. Eventually, the rest of the world will simply say no to continuing to fund more debt. The 1st indications of that no are coming this weekend at the G20”

    (–debt/index/a/19977 )

  7. 7 ThaiCrisis 14 November 2008 at 7:52 pm

    I share more or less this kind of scenario. But we should not underestimate the resilience of the US.
    American are fast. Always have been.

    When Europe is still talking about the sex of the angels and arguing “are we in recession or just a technical recession ?”… the US authorities move very fast.

    And the situation evolves quickly too. Look at Russia. In july with an oil at 140 USD, russians were the new masters… 4 months later, they are deep into the hole (their currency plunged, lack of USD on the streets, the stock market crashed etc.).

    Look at the EuroZone. In july, the BCE was speaking about growth, and inflation risks. They increased interest rates ! 4 months later, everybody understand that it was a big mistake… And (it’s official since this morning) the EuroZone is in recession (first time since its creation)…

    Talk about reversals !

    My point : in theory yes the USD should suffer. But I would like to remind you that currencies are… relative …
    The USD can go down… but if all the other currencies are going down too… you see what I mean ? 😉

  8. 8 hoktula 15 November 2008 at 1:27 pm

    yes, certainly all other currencies will go down as well.

    however already moves are being made to at least lessen the impact of this.

    Thailand’s rice for oil deal with Iran only about 2 weeks ago (Oct 28th) is now a discussed subject in world biz media – that it is an example of re-shaping of world’s affairs.

    moves of many other countries towards strengthening their own currencies and moving away or at least distancing from dollar are nothing new either (Saddam was the first back in 2001 when he switched to petro-euro). now this thing is much more common.

    so, dollar certainly is not gonna continue hold its world hegemony – no matter how “fast” americans are. and G20 meeting is just a beginning of series of multiple other meetings on international level which will be in directions of changing the world’s finance. although Bretton Woods II is considered very unlikely – US will not go for it and sabotage all the efforts towards it.

    gold is surely becomes increasingly a “safe heaven” fro investors, and the main reason its price is low now is huge market manipulations.

    gold is manipulated

    but sooner or later it is gonna blow up. they can’t keep it so forever.

    Comex default in december, $2000 gold in a day

    some opine that it will happen sooner.

    NOVEMBER 28 – Mother of All Short Squeezes for Gold begins ?
    ( )
    “clearly there something bullish afoot in gold”

    one thing is sure – things are not going
    to get better anytime soon !

    “But we should not underestimate the resilience of the US.
    American are fast. Always have been. “

    I would rather say – not American(s) but those guys who OWN US – big bankers and giant corporations. yes, they’ll probably not suffer much, if at all, perhaps even get richer. the majority of Americans though are in pretty deep sh1t !

    and it is illusion to think that the rest of the world will not be affected. many headlines yesterday mention that Eurozone is already officially in the recession. but many specialists say word “recession” is a huge underestimation.

    Today there are headlines about new Food Crisis looming in developing countries.

  9. 9 hoktula 15 November 2008 at 1:49 pm

    Max Keiser about G20 and the Dollar

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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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