Thailand
Thailand: FTI calls for policy rate hike rethink
The Federation of Thai Industries (FTI) is calling for the Bank of Thailand’s Monetary Policy Committee (MPC) to re-evaluate hiking the policy interest rate, fearing harm to the private sector.
The FTI is worried about the effects of the US Federal Reserve’s decision last week to increase its interest rate for the seventh time since late 2015 to a range of 1.75-2%.
Chairman Supant Mongkolsuthree said the business sector wants the central bank to cap the policy interest rate at 1.5% until year-end because a low interest rate is needed to improve overall economic sentiment in the country.
“Once the central bank increases the interest rate above 1.5%, the FTI forecasts business costs will rise as well. We want the MPC to monitor any rate effects and reconsider this matter,” he said.
Mr Supant said the baht’s gains against the greenback have scaled back thanks to the Fed rate hike.
Thailand’s economy has shown positive signs, so maintaining the local interest rate can maintain a good environment and attract new investment, he said.
“Currently, our export sector is benefiting from the baht’s depreciation, and this sector is an important economic engine for the country,” said Mr Supant.
He said the FTI is not worried about the brewing trade war between the US and China, even as US President Donald Trump has recently slapped steep tariffs on billions of dollars worth of Chinese goods, ranging from dishwashers to aircraft tyres.
“The FTI is monitoring those effects, but we have yet to see any [for Thailand], and exports to the US can [still] perform very well,” said Mr Supant. “But Thailand can increase its exports to other countries in Asean and China if there is trouble from the US market.”
He said the FTI is confident the local economy in the next half will be driven by the government’s investment projects like the state-funded Thai Niyom Yangyuen, which should increase local purchasing power.
In a related development, the FTI said the Thai Industries Sentiment Index rose to 90.2 in May from 89.1 in April, with the domestic economy continued to expand, driving the manufacturing sector.
The export sector has further enjoyed large orders, boosting overall sentiment.
Source: https://www.bangkokpost.com/business/news/1487982/fti-calls-for-policy-rate-hike-rethink