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Thai Central Bank's Surprise Action Is 23rd Rate Cut Of The Year
Whether the world's central banks are 'co-operating' or competing is up for question but the tsunami of policy easings so far this year is making the 'surprise' rate cut, unsurprising. As Bloomberg reports, Thailand today became the latest to execute an unexpected interest-rate cut, bringing the total to 23 in 2015. While only 6 of 22 economists expected it, the Southeast Asian country -- a onetime export powerhouse that’s seen its manufacturing mojo dim somewhat in recent years amid historic flooding and political infighting -- lowered its main rate to 1.75%. "The surprise move suggests the economy is much weaker than expected," noted one analyst, adding that "it is negative for the baht and there’s concern that lower rates may lead to more outflows as the U.S. is expected to raise rates."
The Thai economy expanded at its slowest pace in three years in 2014. It has continued to recover slowly, and the central bank will lower its forecast for growth this year from 4 percent on March 20, Assistant Governor Mathee Supapongse said today.
“The policy effectiveness may not be much, but the rate cut can help the economy when the other drivers are not fully functioning,” he told reporters after monetary policy committee members voted four-to-three in favor of today’s decision. “We should use the bullets that we have.”
The central bank will act when needed to support the recovery and maintain financial stability in the long term, he said. Fiscal stimulus, especially the implementation of planned public investment, should be a key growth driver, he said.
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In Thailand’s case, China loomed large. Its biggest trading parter expanded the least since 1990 last year, and the Bank of Thailand acted hours after economic data showed China’s slowdown continued into 2015.
“The surprise move suggests the economy is much weaker than expected,” said Sasikorn Charoensuwan, head of research at Phillip Securities (Thailand) Pcl in Bangkok. “While the reduction is positive for stocks and bonds, it is negative for the baht and there’s concern that lower rates may lead to more outflows as the U.S. is expected to raise rates.”
The benchmark SET Index closed 0.8 percent higher, erasing an earlier loss of as much as 0.7 percent. The baht dropped 0.6 percent to 32.92 a dollar, the weakest since Jan. 5.
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And the Thai Baht is dumping lower...
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Here is the full list of the 23 central bank rate cuts so far in 2015:
1. Jan. 1 UZBEKISTAN
Uzbekistan's central bank cuts its refinancing rate to 9 percent from 10 percent.
2. Jan. 7/Feb. 4 ROMANIA
Romania's central bank cuts its key interest rate by a total of 50 basis points, taking it to a new record low of 2.25 percent. Most analysts polled by Reuters had expected the latest cut.
3. Jan. 15 SWITZERLAND
The Swiss National Bank stuns markets by scrapping the franc's three-year-old exchange rate cap to the euro, leading to an unprecedented surge in the currency. This de facto tightening, however, is in part offset by a cut in the interest rate on certain sight deposit account balances by 0.5 percentage points to -0.75 percent.
4. Jan. 15 EGYPT
Egypt's central bank makes a surprise 50 basis point cut in its main interest rates, reducing the overnight deposit and lending rates to 8.75 and 9.75 percent, respectively.
5. Jan. 16 PERU
Peru's central bank surprises the market with a cut in its benchmark interest rate to 3.25 percent from 3.5 percent after the country posts its worst monthly economic expansion since 2009.
6. Jan. 20 TURKEY
Turkey's central bank lowers its main interest rate, but draws heavy criticism from government ministers who say the 50 basis point cut, five months before a parliamentary election, is not enough to support growth.
7. Jan. 21 CANADA
The Bank of Canada shocks markets by cutting interest rates to 0.75 percent from 1 percent, where it had been since September 2010, ending the longest period of unchanged rates in Canada since 1950.
8. Jan. 22 EUROPEAN CENTRAL BANK
The ECB launches a government bond-buying programme which will pump over a trillion euros into a sagging economy starting in March and running through to September next year, and perhaps beyond.
9. Jan. 24 PAKISTAN
Pakistan's central bank cuts its key discount rate to 8.5 percent from 9.5 percent, citing lower inflationary pressure due to falling global oil prices. Central Bank Governor Ashraf Wathra says the new rate will be in place for two months, until the next central bank meeting to discuss further policy.
10. Jan. 28 SINGAPORE
The Monetary Authority of Singapore unexpectedly eases policy, saying in an unscheduled policy statement that it will reduce the slope of its policy band for the Singapore dollar because the inflation outlook has "shifted significantly" since its last review in October 2014.
11. Jan. 28 ALBANIA
Albania's central bank cuts its benchmark interest rate to a record low 2 percent. This follows three rate cuts last year, the most recent in November.
12. Jan. 30 RUSSIA
Russia's central bank unexpectedly cuts its one-week minimum auction repo rate by two percentage points to 15 percent, a little over a month after raising it by 6.5 points to 17 percent, as fears of recession mount following the fall in global oil prices and Western sanctions over the Ukraine crisis.
13. Feb. 3 AUSTRALIA
The Reserve Bank of Australia cuts its cash rate to an all-time low of 2.25 percent, seeking to spur a sluggish economy while keeping downward pressure on the local dollar.
14. Feb. 4/28 CHINA
China's central bank makes a system-wide cut to bank reserve requirements -- its first in more than two years -- to unleash a flood of liquidity to fight off economic slowdown and looming deflation. On Feb. 28, the People's Bank of China cut its interest rate by 25 bps, when it lowered its one-year lending rate to 5.35% from 5.6% and its one-year deposit rate to 2.5% from 2.75%. It also said it would raise the maximum interest rate on bank deposits to 130% of the benchmark rate from 120%.
15. Jan. 19/22/29/Feb. 5 DENMARK
The Danish central bank cuts interest rates a remarkable four times in less than three weeks, and intervenes regularly in the currency market to keep the crown within the narrow range of its peg to the euro.
16. Feb. 13 SWEDEN
Sweden's central bank cut its key repo rate to -0.1 percent from zero where it had been since October, and said it would buy 10 billion Swedish crowns worth of bonds
17. February 17, INDONESIA
Indonesia’s central bank unexpectedly cut its main interest rate for the first time in three years
18. February 18, BOTSWANA
The Bank of Botswana reduced its benchmark interest rate for the first time in more than a year to help support the economy as inflation pressures ease.
The rate was cut by 1 percentage point to 6.5 percent, the first adjustment since Oct. 2013, the central bank said in an e-mailed statement on Wednesday.
19. February 23, ISRAEL
The Bank of Israel reduced its interest rate by 0.15 percentage points, to 0.10 percent in order to stimulate a return of the inflation rate to within the price stability target of 1–3 percent a year over the next twelve months, and to support growth while maintaining financial stability.
20. March 1, CHINA
China's Central Bank lowered by a quarter percentage point both the benchmark one-year loan rate, to 5.35%, and the one-year deposit rate, to 2.5%. "Deflationary risk and the property market slowdown are two main reasons for the rate cut this time."
21. Jan. 15, March 3, INDIA
The Reserve Bank of India surprises markets with a 25 basis point cut in rates to 7.75 percent and signals it could lower them further, amid signs of cooling inflation and growth struggling to recover from its weakest levels since the 1980s. Then on March 3, it followed through on its promise and indeed cut rates one more time, this time to 7.50%
22. March 4, POLAND
The Monetary Policy Council lowered its benchmark seven-day reference rate by 50 basis points to 1.5 percent, matching the prediction of 11 of 36 economists in a Bloomberg survey. Twenty-three analysts forecast a 25 basis-point reduction, while two predicted no change.
23. March 11, THAILAND
The Southeast Asian country -- a onetime export powerhouse that’s seen its manufacturing mojo dim somewhat in recent years amid historic flooding and political infighting -- lowered its main rate to 1.75 percent.
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WINNING!!!!!!
this article makes me hungry for Thai food
DAMN!!!! The future is so bright I have to wear welding goggles......
now i can get a Bangkok boy/girl for less than a pizza in NYC... things just keep getting awesom-er!
An already affordab le luxury, Thailand is about to become much more so...
Europe will cut rates next
I'm stating now that we will see 1.35% or lower in the 10yr Treasury yield before July 2015.
“Fear is the path to the dark side. Fear leads to anger. Anger leads to hate. Hate leads to suffering.”- Yoda
Sadly, I think 1.35 might be optimistic but then again the Fed money machine can cover up a lot of stupid......
Fed has even reduced the amount of barking and hasn't shown any biting in a while.
23 other CBs have made moves.
I'm a complete idiot but perhaps the Fed has been restricted or even castrated. The scam is approaching maximum exposure.
Swissy depeg the first of many. Who's next? HK? China? Iraq/Vietnam? Why is all of this happening?
Never mind . . . . . . . . . let me get back to a Kardashian episode and to monitor who Rihanna is dating now (granted she's fuckin super hot).
who are Kardashian abd Rihanna?
those that should not be named!
I remember studying the great depression and how trade wars really sealed the deal. And thought wow how could they have been so stupid and good thing they won't repeat that...as they learned that lesson. Well what do they say about history repeating itself. All we now are a couple obtuse politicians to ignore geo-politics and....OH Wait....never mind WINNING!
A couple of quarters of this strong dollar and you will hear screams from the international companies to weaken it....and the game will begin....que the 1930s depression.....
Lord scumbag rothchild is getting excited more and more.
Why would the Fed ever raise rates now....they've won. They ate King of the World....tell them what they've won Johnny.
a giant vortex of Depression.
reset coming
everything is awesome. 7 years of waiting and hoping for the crash. can this finally be the year? probably not. Dent, Stansberry, Kaiser, Jones, Malloney, ZH and others have been touting the collapse for soo long now.
You know it's bullish when banks are getting paid to service debt.