The Bank of Thailand has raised rates 25 basis points to 2.5 per cent, as expected. The decision was unanimous. The central bank held back from a larger rise, saying it viewed high food and energy prices as temporary:

“The MPC viewed that unless political unrest in the Middle East becomes widespread and affects global oil supply, the current spike in oil and commodity prices will not significantly impact the continuity of global recovery.”

**Update: Inflation figures came in lower than expected, dampening the bullish message somewhat. Consumer prices rose 2.87 per cent y-o-y to February, a fall from the previous month**

Expect another rate rise on March 9 – maybe even by 50bp. Assistant Governor Paiboon Kittisrikangwan told reporters today that interest rates are still too low, and that “normalisation” will continue if inflation keeps rising. Read more

Thailand, Indonesia and India have all made bullish noises of late, suggesting they may raise rates in the near future.

Indonesia’s central bank governor said today that it remained vigilant against rising inflationary pressures, which is good to know from a bank that has been keeping at least one eye firmly on growth. Consumer price inflation rose to 6.96 per cent in the year to December, against a 2011 target of 5 per cent +/- 1 per cent. The central bank has kept rates at their post-crisis low of 6.5 per cent to drive growth via commercial loans, Reuters reports. The IMF has called on the country to raise rates, which recently cut import duties on food to try to dampen price rises.

India is expected to raise rates next Tuesday, January 25. A “vast majority” of Read more

Thai central bankers have a double cause for celebration today: projected Thai exports have been revised up for the rest of 2010 and ratings agency Moody’s has removed its negative outlook on the country’s Baa1 credit rating.

Today’s inflation report from the Bank of Thailand suggests an enviable track record, with “strong growth” in the second quarter “mainly driven by merchandise exports and private spending”. Thailand is not impervious to the global economy, however: the Bank speaks of weakening external demand and forecasts exports to fall back to trend in 2011. Read more

The Bank of Thailand has raised the policy rate to 1.75 per cent from 1.5 per cent, citing faster-than-expected growth in Q2 in spite of the domestic political situation. Growth is expected to slow in the second half, said the Bank, and inflation is expected to remain low for 2010. However, the rising cost of production is set to push inflation up in 2011, possibly above the target range, and this is the main driver for the rate change. The move was widely expected.

First it was Indonesia, then South Korea. Inspired by the strength of an Asian recovery that has left the western developed world standing, regional central bankers are challenging old Western orthodoxies, and are embracing once dreaded capital controls.

Is Thailand about to become the latest country to join them?  No. But that hasn’t stopped the new central bank governor from talking about it.

Tarisa Watanagase, the governor of Bank of Thailand, said yesterday that while the bank had no imminent plans to introduce capital controls, many were questioning the conventional thinking on the subject matter.

Capital controls were previously dismissed as something old fashioned, something that interferes with the market mechanism and should not be an acceptable tool of a central bank and I think that idea has changed.

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Thailand has joined the long list of Asian countries reducing the slack in their monetary policy. The Bank of Thailand has just raised the policy rate 25bp to 1.5 per cent, the first rise for almost exactly two years.The statement avoided the use of the word ‘tightening’, pointing out that they were merely reducing “exceptionally accommodative monetary policy”:

Although inflationary pressure remains modest at present, it is expected to rise next year in line with robust economic expansion. The MPC judges that the economic recovery has become more evident and the economy should continue to grow, thus lessening the need for an exceptionally accommodative monetary policy. With a view to bringing policy interest rate closer to normal levels, the MPC therefore decided to raise the policy interest rate by 0.25 per cent per annum, from 1.25 to 1.50 per cent per annum, effective immediately.

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By Simon Roughneen in Bangkok. The Bank of Thailand’s new governor just can’t wait to get started. Long before he officially takes up the post on October 1, Prasarn Trairatvorakul launched into action today, surprising reporters with a statement that Thailand’s interest rate would jump to 2 per cent by the end of 2010.

An interest rate hike had been mooted, with current governor Tarisa Watanagase saying last month that interest rates are too low at the current 1.25 per cent. But she is unlikely to take offence at Prasarn’s dawn salvo. Rather, she will be pleased by the clear promise of continuity of monetary policy. A seamless handover is in prospect.

Prasarn, who steps down as head of Kasikorn Bank next week, said that with the board meeting next week (on July 14) he believed the key interest rate will increase in August, weeks before he is scheduled to take up his new post on October 1. Read more

The Bank of Thailand’s new governor is to be Prasarn Trairatvorakul, currently president of one of Thailand’s largest banks. Dr Prasarn has a cv to make mortals weep: initially studying electrical and industrial engineering, he went on to receive an MBA and doctorate from Harvard. As well as being president of Kasikorn bank, Dr Prasarn is executive director of the Thai Bankers’ Assocation (the source of his photo, right), and a director of the Thai red cross. He has worked for a long time as an economist and in the Securities and Exchange Commission, giving him an excellent background for the current global situation. Read more

Start pricing in a 25bp rise in Q4: that’s the message from the Thai Finance Ministry. The policy rate – the one-day repurchase rate – is currently at 1.25 per cent and has been on hold since April 2009, having been cut in four consecutive decisions from 3.75 per cent in August 2008.

If no more contenders come forward, these four candidates will form the list of governor hopefuls, which is due to be handed to the finance minister next week. They are in the frame to replace Thai central bank governor Tarisa Watanagase, when her four-year term ends in September.

Guidelines state that candidates must be less than 60 years of age, possess extensive economics or financial knowledge, and must not have worked in any political appointment for at least a year. The list thus far:

Simone Baribeau

Q: What do jitters over European debt, stubbornly high unemployment and earthquakes have in common?

A: They have all been cited as reasons for central banks to delay interest rate hikes.

It’s not just economic crises that cause central banks to postpone tightening monetary policy. Since the beginning of the year, a number of political and natural disasters have pressured banks to keep rates low. Here is Money Supply’s list of the top three non-financial events that kept rates low. Are we missing any? Comments welcomed below. Read more

The Bank of Thailand has ended restrictions on the amount Thai firms can invest abroad, raised the foreign investment limit for Thai mutual funds to $50bn from $30bn and cleared the way for wealthy Thais to spend more in overseas property markets, deputy governor Bandid Nijathaworn told a news conference.

The changes will reverse the effects of capital controls imposed in 2006 during a political crisis. The Thai stock exchange announced yesterday that it too would soften regulations, to encourage the listing of companies worth Bt100bn ($3bn). Read more

The Bank of Thailand has agreed to keep the one-day repurchase rate unchanged at 1.25 per cent. The bank saw continued recovery ahead, driven by exports, tourism and consumption but noted that: “Asian economies are likely to recover sooner, giving rise to policy differentials which may lead to more volatile capital flows going forward.” The bank expects inflation to rise in 2010 although upward pressure from demand currently remains low.