Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
Settings
Settings
Dynamic quotes 

4-Traders Homepage  >  News

News

Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesHot NewsMost Read NewsRecomm.Business LeadersCalendar 

PRESS RELEASE : Bank Of Thailand: Inflation Remains In Manageable Level; But Upside Risk Persists

share with twitter share with LinkedIn share with facebook
share via e-mail
0
05/16/2012 | 04:42am CEST

The following is unedited text of the minutes of the Bank of Thailand's Monetary Policy Committee meeting on May 2, 2012:

Members Present

Prasarn Trairatvorakul (Chairman and Governor), Suchada Kirakul (Vice Chairman and Deputy Governor, Monetary Stability), Sorasit Soontornkes (Deputy Governor, Corporate Support Services), Ampon Kittiampon, Siri Ganjarerndee, Narongchai Akrasanee, and Asawin Kongsiri.

Monetary Policy Target for 2012

On April 17, 2012, the Cabinet approved the monetary policy target for 2012 proposed by the Ministry of Finance to maintain the target range for quarterly average core inflation of 0.5-3.0 percent per annum, which was deemed appropriate given the current economic situation.

Financial Markets

Market confidence improved temporarily before declining from concern over sovereign debt problems in Spain and Italy. Major currencies strengthened as investors once again turned to safe-haven assets.

The bilateral Thai baht exchange rate remained roughly unchanged from the previous meeting, with lower volatility in line with regional currencies. This was attributable to more balanced capital flows, partly due to an increase in demand for US dollars by gold and oil importers.

Short-term money market interest rates stabilized in line with the policy rate, reflecting market expectations that the MPC would keep the policy rate unchanged at this meeting.

Meanwhile, the Bangkok Interbank Offer Rate (BIBOR) of maturity greater than 3 months increased in tandem with higher short-term government bond yields, reflecting market expectations that the policy rate might be adjusted upward in the next 3 - 6 months.

The International Economy

The global economy continued to grow at a gradual pace with improving signs of

recovery in the major economies. US economic outlook improved on the back of positive developments in the labor market and income prospects, as well as stronger private sector confidence.

Meanwhile, the eurozone economy entered a recession and it would take time for the structural problems to be resolved. Nevertheless, the MPC assessed that the overall eurozone economy might suffer less severe contraction than previously thought, based on more positive leading indicators in manufacturing and export sectors in core countries.

Although problems in Spain might affect market confidence somewhat, it was anticipated that they could be contained by the Spanish and European authorities. Economic growth in Asia softened in line with moderation in exports.

Nonetheless, a gradual pickup in exports towards the end of the second quarter was expected following an increase in new export orders, particularly for exports of intermediate goods and electronic parts to China.

This was in line with the anticipated strengthening of the global economic recovery in the latter half of this year.

Some MPC members expressed concern over growing political uncertainties in both Europe and Asia, which could hinder the resolution process for sovereign debt in Europe and remained a risk factor to Asia's economic recovery.

Global inflation remained stable relative to the previous meeting, though pressure from an elevated oil price level persisted.

The MPC noted that the extraordinary easing of monetary policy by major industrial economies could be one of the factors adding to higher global inflationary pressure in the periods ahead. Most central banks kept policy interest rates unchanged opting to wait for greater clarity on the outlook for global economic recovery and inflation.

The Domestic Economy

The recovery of the Thai economy in the first quarter was faster than expected.

Production of most flood-affected manufacturing firms has returned to pre-flood levels while some of those unaffected has accelerated their production.

On the whole, manufacturing production was projected to return to normal levels by the end of the second quarter this year, earlier than the third quarter projected previously. Private consumption and investment accelerated as supply shortages eased, consumer and business confidence strengthened, and domestic purchasing power increased due to favorable income conditions in both farm and non-farm sectors.

Exports were expected to rebound sooner than previously assessed in tandem with the recovery of manufacturing production and the anticipated pickup in global demand.

Government stimulus measures and accommodative monetary conditions would continue to support sustained economic recovery going forward. In light of the broad-based recovery, which has been faster than expected with good momentum evident in all components, the MPC adjusted GDP growth projection for 2012 upward to 6.0 percent from 5.7 percent in the previous meeting.

Inflation slowed down in April partly as a result of the high base of the previous year and the reduction of some fresh food prices back to their normal levels.

The moderation in inflationary pressure was expected to be temporary given that several items in the CPI basket, such as electricity charge and public transportation fare, are in the process of upward price adjustment. Moreover, elevated oil prices and the minimum wage hike in the context of a strong pickup in domestic demand, as well as heightened public concern over the rising cost of living, could add to higher inflation expectations.

This, in turn, could result in a greater pass-through of higher costs to prices of goods and services. The MPC deemed it too early to assess the full impact of the minimum wage hike on inflation at this point, and would continue to monitor and appraise the effect as more information becomes available.

The MPC suggested that communication regarding the role of monetary policy in tackling inflationary risks should be enhanced to foster a common understanding with the public.

Emphasis should be placed, in particular, on the importance of demand management and anchoring inflation expectations in attaining price stability. Regardless of the immediate cause of inflation pressure in the short-term, its persistence and impact on overall price stability in the long run hinges on the credibility of monetary policy.

Monetary Policy Considerations

The MPC assessed that the recent easing of monetary policy has helped to shore up private sector confidence and contributed to a broad-based recovery which has been faster than expected.

The global economic outlook appeared more positive, particularly with respect to major economies, while the sovereign debt crisis in the eurozone was not expected to deteriorate much further. However, the recovery of global economy remains fragile amidst high uncertainties especially regarding the lingering structural problems in the eurozone economy which would take time to resolve.

This continues to be a risk factor for Thailand's economic recovery. Some members viewed that the faster-than-expected recovery of the Thai economy in the first quarter was partly due to the acceleration in production as well as private consumption and investment as part of flood-related replacement and restoration spending, which could moderate in the following quarters.

It was thus important to closely monitor incoming information to obtain a clear bearing on the strength of the economic recovery going forward.

Although inflation might have moderated in April and remained within a manageable level, upside risks to inflation continued to persist. Thus, it is necessary to closely monitor factors that could affect the dynamics of inflationary process, especially public concern over the rising cost of living which could fuel inflation expectations in the periods ahead.

In weighing the balance of risks, the MPC deemed the current policy interest rate to be appropriate in supporting a sustained recovery of economic activity to normal levels in the face of remaining risks in the global economy while still consistent with keeping inflation within target.

The MPC, therefore, voted unanimously to maintain the policy rate at 3.0 percent per annum.

The MPC would remain vigilant in monitoring developments of the key risk factors and stands ready to take appropriate policy action in response to material shifts in the balance of risks.

The MPC discussed the appropriateness of policy rate renormalization in the upcoming periods. The recent temporary easing of monetary policy was aimed at preventing deterioration in domestic demand, especially weaker business confidence, from aggravating the impact of the flood on the economy.

Given that economic recovery has gained traction with robust momentum going forward amidst sustained rise in private sector confidence, the need for current exceptional policy accommodation should continue to decline.

Meanwhile, the rise in inflationary pressure reinforced the need to renormalize the policy rate at an appropriate time.

share with twitter share with LinkedIn share with facebook
share via e-mail
0
Latest news
Date Title
07:26p PHILIPPINE STOCK EXCHANGE : Market expected to remain volatile
07:26p HSBC : Philippines ranks high in expat survey on social relations
07:26p PETRON : SMB inspired to retain crown
07:26p SAN MIGUEL : DA, SMC food division eye milling facility in Sulu
07:25p ABOITIZ POWER : unit to raise P1.4 B from debt market
07:19p TECHNOGYM : Hotel gyms offer fitness with plenty of frills
07:18p ELAN MICROELECTRONICS : August Revenue of NT$692 Million, Hit a New High in 26 Months
07:18p UTTARA FINANCE AND INVESTMENTS : Three new export-oriented sectors to get cash subsidy
07:17p DOW CHEMICAL : HHW event brings large turnout
07:14p JOHNSON & JOHNSON : The Philadelphia Inquirer Kellie Patrick Gates column
Latest news
Advertisement
Hot News 
21.42%Twitter In Talks with Suitors, Including Salesforce, Google -CNBC's Faber
15.45%Endo International CEO steps down, Campanelli named successor
-7.37%FTSE records best week in three months
9.77%SANTANDER CONSUMER : USA to Restate Financial Reports
-5.17%FINISH LINE : Comparable Store Sales Rise
Most Read News
03:01a MICROSOFT : HostForLIFE.eu Launches Moodle 3.1.2 Hosting
09/24 FACEBOOK : apologises for shutting down Palestinian journalists' accounts
09/24 MACY : Washington state mall shooting suspect named as victim's mother speaks
09:15a LINKEDIN OFFICE BY PERKINS + WILL WINS INTERIOR DESIGN OF THE YEAR : Office
04:30a MANCHESTER UNITED : After dropping Rooney, United beats Leicester 4-1 in EPL
Most recommended articles
12:59pDJSelf-Driving Hype Doesn't Reflect Reality
12:03pDJAt Carnival, It's No Time to Jump Ship -- Ahead of the Tape
11:59aDJSAMSUNG ELECTRONICS : Complaints Arise Over Replacement Batteries for Samsung Galaxy Note 7 -- Update
11:24aDJAll the Texas Tea in China Is Less Than It Once Was -- Heard on the Street
05:38a TENCENT : to donate 2 percent of profit as Chinese online charity grows