Thailand Gets a Second 25-Basis Point Monetary Tightening

August 25, 2010

The Bank of Thailand’s one-day repo rate was raised to 1.75% following a 25-basis point initial increase to 1.50% announced July 14.  Officials released a statement noting that second quarter GDP growth of 0.2% from 1Q and 9% from 2Q09 had been faster than expected.  Sectors that could have been hurt by earlier political unrest such as tourism and consumption have recovered speedily.  Inflation of 3.4% as of July is expected to rise in 2011, and above-target core inflation at some point in 2011 cannot be ruled out.  Officials consider 1.75% to still be “very low” relative to Thailand’s economic growth.  More rate increases lie ahead.

Rate cuts from a peak of 3.75% of 100 bps in December 2008, 75 bps in January 2009, 50 bps in February 2009 and 25 bps to 1.25% in April 2009 enabled Thailand to share fully in the impressive turnaround of Asia’s economy.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.



Comments are closed.