Policy rate cut to support economy

Kobsak Pootrakool, Bangkok Bank executive vice president, said the banking industry would probably lower lending and deposit rates soon, as reduced demand for loans had eased the pressure to bring in deposits.
BBL president Chartsiri Sophonpanich said the bank would consider cutting its rates soon to help boost the economy.
Banks were unable to lower their rates in line with the policy rate early this year because the loan outlook in the first half was high, causing tense competition for deposits. But now the situation has changed.
Amornthep Chawla, vice president and head of economic and financial-market research of CIMB Thai Bank, said the banks might not trim interest rates immediately, but the BOT’s move should enhance the sentiment for domestic consumption. He believes the policy-rate cut will help drive the economy next year.
The central bank says it lowered the policy interest rate to support the economy, after key numbers in the third quarter came in worse than expected and the confidence level in the private sector is now much more fragile because of the political situation.
The BOT also lowered its expectation for the country’s 2013 economic growth from 3.7 per cent to 3 per cent, but expects the rate of expansion to bounce back to 4 per cent by the middle of next year.
Assistant Governor Paiboon Kittisrikangwan yesterday said in a press statement that even though the level of private debt was still worrisome, there were signs that it was slowing down.
“The majority of the committee [Monetary Policy Committee] believes that in the short term, our decision to lower the interest rate will not worsen the household debt problem, which has decreased considerably because the people and commercial banks are more responsible before asking for or giving out loans,” he said.
Paiboon explained that as a whole, the global market was expected to recover after the expansion of its biggest markets, especially the United States, but it remained highly unstable because of Washington’s changing of its monetary and budgetary policies.
The Asian market is also moving forward gradually, thanks to the increase in exports in the Northern Hemisphere, especially in China, he added.
However, the growth rate of Thailand’s economy in the third quarter is “hopeless”, according to the assistant governor, because of lower-than-expected private and public spending, which has increased risk in the market.
Moreover, the export sector, which was already performing badly this year, has not benefited from the recovery of the global market in the third and fourth quarters.
The delay in government spending and the current political situation have also damaged investor confidence, which was already fragile, he said.
To combat the lower-than-expected numbers, and “since the rate of household debt is slowing down, the Bank of Thailand decided by a vote of 6-1 to lower the interest rate to reduce risk and support the economic recovery”, Paiboon said.