Inflation is worse than interest

Bank of Thailand prepares to raise interest rates 3 times

the wind changes direction

17 Jun 2022 05:55





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The baht

, Wednesday, June 15, weakened to 35.05 baht per dollar.

The weakest in 5 years. Investors are worried about the strong interest rate hike.

The Federal Reserve


to announce on the night of June 15 (I wrote this article about 10 hours before the Fed raised interest rates).

The Fed will raise interest rates hard to 0.75 percent to dampen inflation, which rose to a 40-year high of 8.6 percent in May.

from the wrong assessment of the situation of the US Federal Reserve

Home loans rose another 1% to 6.28%, with Americans unable to pay installments and had to leave their homes.

became homeless and slept in many public places and roadsides.

until it is unbelievable that it is the state of the world's number one superpower

Fed starts interest rate 0.25% in March to suppress inflation but fails

May Fed raise interest rates another 0.50%, failing to suppress inflation

Inflation has risen to its highest in 40 years. Meeting on June 14-15, the Fed is expected to raise interest rates to 0.75%. Next meeting, July 26-27, the Fed will raise interest rates another 0.75% to suppress inflation.

With the remaining three meetings in September/November/December, the Fed may have to raise interest rates again if it can't keep inflation down to 2%.

Dr. Supawut Saichuea

, Advisor of Phatra Research Institute


Today, the Fed is facing serious problems with its recent rate hikes.

Make it up and have to speed up.

Last year's inflation rate was 2%, but this year it's 8%, so if the Fed raises interest rates by 0.75%, it's pretty small.

because inflation at this level is difficult to fall


need to compress drugs to exceed inflation

If inflation lasts at 8%, the Fed may have to raise interest rates to 9% to bring inflation down. Like the historical US inflation peak of 13%, the Fed needs to raise interest rates to 20% to survive.

Thai inflation in May

It jumped to 7.1%, the highest in three years due to higher energy and food prices.

Standard Chartered Bank economists expect the Monetary Policy Committee (MPC) to hold a special meeting.

to raise the policy interest rate by 0.25% and increase another 0.25% at the regular meeting on August 10 and increase another 0.25% at the meeting on September 28, a total of 3 times 0.75%, causing the policy interest to rise to 1.25%.

The last meeting of the MPC in 30 November is not expected.

The day before

, Dr. Sethaput Suthiwatanaruput

Governor of the National Bank

has come out to send a clear signal

"The era of low interest rates is over" and raise Thai inflation this year to 6.2%, while expressing concern that if

“Inflation engine stuck,” especially core inflation.

(Consumer Price Index) will increase significantly.

It was 0.2% last year, this year should see 2% if core inflation increases.

General Inflation Chances

(From all product price groups) is difficult to be low.

Dr. Sethaput

pointed out that if inflation is highly volatile

Business planning can be difficult.

Investments may stall

The low-income groups are most affected.

Wages are usually lower than inflation.

Households need to consume food, beverages and energy.

which is the highest inflation category

The Bank of Thailand has a duty to keep the inflation engine from running. In the past, Thai interest rates were among the lowest in the region.

But inflation ranks among the highest in the region.

If the interest rate is raised too late

There is a chance that interest rates will need to be accelerated quickly and strongly in the latter. The BOT does not want it to come out that way.

As for how many times it will go up, I don't have a goal in mind.

Dr. Setthaput

summarizes the picture clearly.

interest rate hike

increase the cost of borrowing

But if you do nothing

households will be more severely affected.

Calculating the cost of inflation and interest

If a 1% interest rate hike and 4–5% inflation cost a difference of 7 times, raising interest rates is definitely better than increasing inflation.

The lesson in the US is an example.

"The wind changes direction"