Industry groups urge further cuts
Local private-sector organisations have urged the central bank to follow Wednesday's policy rate cut with another 25-basis-point reduction in the next few months to boost the economy and reduce funding costs.
Payungsak Chartsutipol, chairman of the Federation of Thai Industries, said that another policy rate cut of 25 basis points was expected in the next two to three months to lower operators’ costs.
The Bank of Thailand’s Monetary Policy Committee (MPC) is expected to take various factors, including neighbouring countries’ benchmark rates, into consideration when it makes its decision. If Thailand and neighbouring countries’ rates differ too much, foreign capital may flow into Thailand for speculative purposes and state agencies would need to find ways of coping with this.
Payungsak said the baht had stabilised in recent months. However, the large amount of capital entering the global financial system after the recent third round of US quantitative easing (QE3) currently seeks high-return assets in countries around the world.
Paiboon Ponsuwanna, chairman of the Thai National Shippers Council (TNSC), agreed with the MPC’s recent move and urged the monetary authority to go further, saying relatively higher interest rates here have attracted foreign capital, causing the baht to appreciate.
QE3 has prompted more foreign capital to flow into Asia, he said, adding that while some countries, like Indonesia, have higher interest rates, Thailand remains more attractive.
If the MPC had not lowered its policy rate, the baht would have strengthened even further and harmed exporters, who have been facing a slowdown, the TNSC chairman said.
Paiboon said this week’s policy-rate cut would encourage commercial banks to cut their lending rates in the next two to three months.
Thai exporters, raw-materials makers and small- and medium-sized enterprises would benefit from the possible lower funding costs, he said.
Vichai Assarasakorn, secretary-general of the Thai Chamber of Commerce (TCC), said the recent policy-rate cut was in line with the Thai economic situation, which has seen exporters face slowing demand.
Whether the MPC would approve another rate cut would depend on the local economic situation, particularly the export environment, Vichai said.
If the Thai economy worsens, the monetary authority may have to implement another cut, as interest rates influence financing costs and the amount of capital flowing into the economy, the TCC secretary-general said.
