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Thailand: Apisak: No need for rate hike
Subdued inflation indicates that the first interest rate hike since 2011 is still distant, says Finance Minister Apisak Tantivorawong.
If the interest rate is increased, the private sector should be able to adjust, he said, while the public and the government may shoulder a little more financial burden.
It is the central bank’s duty to thoroughly consider the issue, Mr Apisak said.
Bank of Thailand governor Veerathai Santiprabhob said recently that the central bank was under no immediate pressure to hike rates, given low inflation and solid buffers against capital flight.
The governor’s latest comment was more neutral than earlier, when he said the central bank was waiting for the right time to consider a rate hike, prompting some analysts to predict a policy move later this year.
The rate-setting committee has kept the benchmark rate at 1.5%, near a record low, since 2015, in contrast to counterparts in Indonesia and the Philippines, which tightened policy rates earlier this year in the face of currency turmoil.
Thai GDP grew 4.6% in the second quarter versus a year earlier after expanding at a five-year high of 4.9% in the first quarter, marking first-half growth of 4.8% year-on-year.
The headline inflation rate, as gauged by the increase in the consumer price index, was 1.62% year-on-year in August, the highest since October 2014. For the first eight months, inflation averaged 1.12% on the same period last year.
Despite accelerating inflation, the rate remains at the bottom end of the central bank’s target band of 1-4% this year.
The Monetary Policy Committee is scheduled to meet to determine the one-day repurchase rate on Sept 19, a meeting at which few economists expect the normalisation process to begin.
Mr Apisak said the Finance Ministry’s focus before the next general election scheduled for February next year remains paving a strong economic foundation. This includes addressing poverty and the national e-payment scheme, he said.
The government is working to ease the cost of living and boost income for those earning up to 100,000 baht a year by offering a monthly living allowance of 200-300 baht to 11.4 million people to buy goods at Thong Fah Pracha Rat shops.
Those who signed up for job training receive an additional living allowance of 100-200 baht a month.
The government is also on course to launch a six-month period for value-added tax payback to welfare smartcard holders, giving low-income earners more disposable income to strengthen their purchasing power and boost domestic consumption.
Regarding the sharp fall in the stock market, Mr Apisak said external factors prompted a sell-off in Thai shares but the country’s economic fundamentals remain solid.
Source: https://www.bangkokpost.com/business/finance/1539022/apisak-no-need-for-rate-hike