Thailand's Weakness as Fed Signals Strong Interest Rates Up

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29 Aug 2022 17:02





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The strong signal came from

Federal Reserve Chairman Jerome Powell,

who said:

"The Fed will continue to use its tools to thwart inflation that has remained at a high level in nearly a year. 40 years from now, even if it hurts US households and businesses

because if there is a failure to restore economic stability

may lead to more intense pain”

which equates to

It is almost certain that the Fed

will continue to raise the policy rate continuously.

(Currently, there are 3 meetings left to consider this year, namely 20-21 September 65, 1-2 November 65 and 13-14 December 65), although counting since the beginning of last year

The policy rate has been raised 4 times in a row until the latest to



Jerome Powell, President of the United States Federal Reserve (Fed)

That brings up the

"big question" whether the


's intense policy interest rate hike

this time.

How will it affect the US economy, the global economy and the Thai economy today


Therefore, I would like to talk to

"Mr. Thanong Pittaya, Former Finance Minister"

to seek


from those

"big questions"


“The question is how to make the economy grow while the policy interest rate can be controlled.

Inflation can be controlled, that is the heart of the economy.”

Former Finance Minister

Start a conversation with the Thai Rath Special News team online.

Thanong Pittaya, former Minister of Finance

Fed and interest rates rising:

“The first thing that needs to be understood is the US economy.

The unemployment rate has to be between 4-5% and inflation has to be 2-4% to be considered balanced.”

In the last 3-4 years, the United States has injected huge amounts of money into the system.

When it's time to absorb the money out of the system

It has become a very high inflation problem, so

the US Federal Reserve

has to act in two main ways: 1. Absorb money from the system.

2. Raising the policy interest rate

Along with considering inflation and unemployment rates

“Because under normal circumstances, inflation is high, the unemployment rate is low, so when pushing inflation down by raising interest rates and absorbing money out of the system, they will see if the employment rate will go down or not?”

But at present, as the unemployment rate in the United States is below 5% , the


has continued to raise its policy rate to address inflation.

Personally, I believe that if the Fed can push inflation down to


level, when it will gradually slow down the policy rate adjustment.

Even though it continues to absorb money from the system

The United States and the Inflation Problem:

The signal of Mr. Jerome Powell, in his personal opinion, would be interpreted to mean that although the


is still unable to control inflation.

But US economic fundamentals are still good.

Whether it's about a low unemployment rate

to increase productivity or trade, so when there is confidence

The economy is still good, so the


still dares to continue raising the policy rate.

Because it is necessary to slow inflation, although the policy rate hike

may be exchanged

Delaying employment, but if the unemployment rate stays at 4-4.5%, it wouldn't be much of a concern.

“Because at this time

US economy

It is not yet considered a recession, but its economic growth is increasing at a reduced rate.”

Thanong Pittaya, former Minister of Finance

Impact on the global economy and the Thai economy :

“If you ask me that the Fed's signal this time

Will it affect the world economy and Thai economy or not?

The answer definitely affects!”

The injection of more than 7-8 trillion US dollars.

It is not distributed only in the US capital market.

But it spreads to capital markets around the world, including Thailand. For this reason, when the United States continues to suck money back by raising the policy rate.

Foreign investors will gradually pull their money back where they think.

“Invested and received returns that are not worth it.

compared to the interest rate that must be paid.”

and now have to admit

“A lot of money”

is returning to the

“Bond market”

after the bond market started to rise in price.

Due to the policy interest rate hike of the central banks of many countries, especially the United States.

In addition, the investors themselves

will change the investment method

from stock market to bond market in increasing proportion

In order to spread the risk to get the most worthwhile return

Results of the next three Fed meetings this year:


the Fed

would consider inflation numbers that inflation from rising prices of goods and services.

due to the increase of raw materials

Wages and Costs

until the overall supply is reduced (Cost-Push Inflation) has already started disappearing?

But what's worrisome is that if it's still

Inflation caused by high demand

until the price of goods and services increases (Demand Pull Inflation).

“Rising production costs”,

as is happening today, are the main decision-making factors.

To avoid the risk of causing both inflation during recession.

It could also be massive inflation.

Also known as

"Hyper Stagflation"

All of these factors are a delicate matter that the Fed will have to monitor in order to decide whether

What has been done since the beginning of this year

“Worth it or not?

effective or ineffective?”

and can inflation be controlled?

because at this time must admit

The price of oil is still not much lower.

The Ukrainian war is not over yet and there is always

Supply Shock

and the world situation is still full of volatility.


In my personal opinion, at least at the end of this year.

There should be a trend that clearly indicates that the


will begin to relax on maintaining high policy interest rates.

how long to go

Thai Economic Situation :

“It is important not to forget that the tourism sector accounts for 20% of Thailand's GDP.”

The problem of the Thai economy at this time is

Even though the policy interest rate will remain low

But investors have not invested.

when no investment

productivity did not increase

When the productivity does not increase

The economy is not growing or growing very little, so what happens is

Even with low interest rates or how much the government has policies to support investment.

As long as the driver of the economy to grow, which is caused by 2 main factors, which are exports and tourism.

that has not yet fully grown

Thai export sector

At this time, it may begin to adjust somewhat.

But what is still worrying is

The tourism sector, although it is getting better

But the number of tourists is still less than 20% of what used to be. Therefore, the income is only 1 in 4 that Thailand has ever received.

Therefore, we still have to wait for the moment for Thai tourism to recover again next year.

because if foreign tourists have not returned

No matter how much money he injected, it wouldn't have helped much.

Bank of Thailand and interest :

The National Bank will continue to gradually raise the policy interest rate.

However, in my personal opinion

I'm glad that the Bank of Thailand has the freedom to decide whether

His suitability to economic performance, how would you use the interest rate?

How much money do you use?

make it clear that

The Bank of Thailand has started to regulate and not rush to raise interest rates too much.

That's because Thai economic problems are not the same as US economic problems.

Because the economic growth rate of Thailand is not growing like other countries or even many countries in the ASEAN region itself.

“In Thailand, we grow only 2-3%, plus the trend of growth this year.

Which was previously expected to be around 3%, it may start to be lower than 3%.

The economy grows lower, and inflation is still up a bit, but fundamentals are not much.

Therefore, the National Bank gradually raised interest rates one level at a time.

Which is likely to be at a dime each time and so on.

Because if you decide to raise the policy interest rate high

It will be a burden on investors.

If investors and the economy can't continue to drive because of the problem of

Interest burdens that cause high operating costs

The economy can't grow

There is no investment.”

General Prayut Chan-o-cha, Prime Minister

Government stability and Thai economy :

“What we need to urgently do now is how to stabilize the government and be able to persuade more investors to invest in Thailand, that is the heart of the matter right now.

Because at present, I have to admit that foreign investment in Thailand is much less when compared to foreign investors who invest in Vietnam or Malaysia, so it is the weakness of Thailand.

Investors do not come to Thailand by any factor.

I have to find out why, despite the overall fundamental factors of Thailand that are conducive to the machinery industry.

Vietnam and Malaysia still have an advantage, so there is still a lot of homework to do in attracting investors to lead to economic recovery,”

said former Finance Minister Thanong Bidaya.

finally said

Special news team, Thairath Online reports.

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