MPC raises interest rates at the end of the low-interest era

the wind changes direction

10 Aug 2022 6:41 a.m.





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This morning, the National Bank will have a meeting.

The Monetary Policy Committee (MPC) to consider raising the policy interest rate.

Which has been held at a low rate of 0.50% for a long time, while national banks around the world have raised interest rates several times.

to combat the rapidly rising inflation

But the Thai interest rate hike in the direction that Dr. Sethaput Suthiwatanaruput

The governor of the Bank of Thailand gave several interviews.

It is expected that it will not increase as strongly as the US and Europe.

But it will increase gradually. Therefore, the MPC meeting today is expected

It will raise interest rates by only 0.25 percent and another 0.25 percent in the remaining two meetings this year, keeping the year-end policy rate at 1.25 percent, not too high and not too low.

Because Thai inflation is still within the expected range.

Thai inflation is a different type of inflation.

Inflation occurring in the US and Europe

Inflation in Thailand is called cost push inflation caused by rising costs.

causing merchants to increase product prices and administrative fees

The main cost increase is the price of energy such as oil, gas, electricity based on crude oil prices.

in the more expensive world market

But now global crude oil prices are starting to fall below $100 a barrel.

Thai inflation is caused by only one problem, which is high energy prices.

But wages have not increased.

There is news that the minimum wage will be raised by 5–8% in the fourth quarter or early next year.

It is considered not much.

Thai inflation is therefore easier to control.

US inflation caused by Demand Pull, a large increase in demand for goods and services

But there are not enough products and services.

The seller therefore raised the price of the product and service fee.

As a result, inflation rose sharply to a record high in 40 years. The purchasing power of Americans increased.

caused by the US economy that is growing hot

There is a large increase in employment

But the Federal Reserve wrongly analyzed the situation.

Did not raise interest to cope early

It just accelerated when inflation hit its highest in 40 years.

July employment figures in the US

It also increased much more than expected.

Shows that the US economy is still hot.

Employment increased to 528,000, more than double the expected 258,000.

So it is expected that the next meeting

The Fed may have to raise interest rates hard again by 0.75% to 3.00–3.25% to curb inflation.

But the Thai economy today is still addicted to covids.

Gradual growth Dr. Setthaput, Governor of the Bank of Thailand, expects GDP growth of only 3 percent in the second quarter of this year, driven by factors.

increased exports

increasing foreign tourists

(But sewage politics is a heavy weight) Overall, the Thai economy is expected to grow 3.3% this year.

The growth of only 3.3% compared to the negative 6.1% GDP in 2020. I think that has not even recovered because the GDP last year 2021 has grown only 1.6% when including the GDP of the last 3 years since the year 2021. 2020-2022 Thai GDP is still negative 1.2%, accelerating interest rates must be cautious

Because it may affect the recovery of the Thai economy that is still fragile.

especially SME businesses

It also makes the cost of goods and services more expensive.

while domestic purchasing power is still weak

Dr. Sethaput compares the effects of inflation with interest rates. If raising the interest rate by 1% will make households in debt.

An average increase in interest burden of 0.5%, compared with a 3.6% increase in household expenditures from inflation, would make it seven times more burdensome than the rate hike. July inflation was 7.61%, down from 7.66% in June.

If the policy interest rate is raised by 0.25%, it is considered a very small impact.

As for the debtor who borrows to buy a house, buy a car or a business with lone terms.

Will not be affected because fixed interest rates and pay in installments

except new borrowers

Raising interest rates of national banks around the world

signal clearly that

The low interest era is over. From now on, managing costs, interest and inflation is essential.

Will the business survive or not?

It's right here.

"The wind changes direction"