The Bank of Thailand cut short-term interest rates by a half of a percentage point yesterday as part of its ongoing efforts to jumpstart the economy.
The rate cut brings the one-day repurchase policy rate to 1.5% from 2%. Over the past three months, the central bank’s Monetary Policy Committee (MPC) has cut rates by 2.25 percentage points in an effort to spur growth. (Bangkok Post)
Repurchase interest rates are already near zero in US, UK, Japan… Did it change something ? NIL. Zero. Nada.
In Thailand, they will go to zero too. Meanwhile, the banks… display much higher rates. Check the spread.
Those who believe that free money (for the banks) can solve the crisis are making a big mistake. There is no demand. I mean no solvent demand.
Why a business would ask for a loan to build a new factory, when there is no demand out there, and when no bank would provide this loan in any case, because the risks are increasing, on a daily basis ?
It’s a fallacy. A fantasy of narrow minded people who think that the Magic Stick of low interest rates will solve any kind of problem. The famous Greenspan Put.
This crisis is not a liquidity crisis. It’s a solvency crisis.
The best proof in Thailand :
Siam Commercial Bank has no plans to cut its mortgage loan rates, even though interest rates continue to decline.
Rungruang Sukkirdkijpiboon, an SCB executive vice-president, said the bank’s current rates were already low.
The bank currently offers fixed rates between 3% and 5% for the first three years of mortgage loans.
“Based on current spreads for housing loans, we don’t really have room to reduce fixed rates for mortgages,” he said. (Bangkok Post)
This manager is right : why his bank would lower its fees on risks when… risks are increasing ?
Why would he lower mortgage rates for people… who are going to lose their job because of the crisis ?
Why would he take in colateral for a new mortgage a house with an overvaluated price ?
This is non sense. Pure logic. Unavoidable. No escape.
It’s true here, there, in Asia, Europe, USA, everywhere on this freaking planet.
If you still want to live in Wonderland supercharged with LSD, try to get a cheap loan on Jupiter. Or Saturn. In exchange, those aliens would be happy to increase the intergalactic trade, and will be very happy to help Thailand exporting its goods (just to please Khun Abhisit, he has such a nice haircut).
Three large-sized banks, Bangkok Bank, Krung Thai Bank, Bank of Ayudhya, yesterday announced lending and deposit rate reductions by 25 and 10-50 basis points, respectively. The change will take effect on Monday. (Nation)
Voila. The BOT cuts by 50. Bangkok Bank follows with… 25.
The Bank of Thailand (BOT) has urged commercial banks to cut their lending interest rates more sharply than deposit interest rates, while indicating monetary policy has limited room to boost economy.
BOT’s deputy governor Bandid Nijathaworn’s comment was a response to the banks’ cutting of rates after the central bank had reduced its policy rate by 50 basis points on Wednesday, to 1.50 per cent. (Nation)
Voila bis. The reaction of the BOT is not surprising. 😉