Thailand implements third modest rate increase

ECONOMY RECOVERY:
Thailand is likely to reverse the global trend of declining growth next year as foreign tourists return, and its third-quarter GDP growth rose 4.5% annually.

Thailand raised its key interest rate by one quarter point for a third straight meeting as an economic recovery helped by tourism revival risked stoking prices.

The Bank of Thailand’s monetary policy committee yesterday unanimously voted to raise the one-day repayment rate by 25 basis points to 1.25 percent, as seen by 20 out of 21 economists in a Bloomberg survey.

One economist predicted that the rate would remain unchanged.

Thailand’s gradual easing approach, once seen by some analysts as too little to cool price hikes at a 14-year high and a currency at a 16-year low, now looks more appropriate as it eases pressure on both fronts.

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Southeast Asia’s second-largest economy is gaining momentum as foreign tourists return, while GDP growth rose 4.5 percent in the third quarter from a year earlier, the fastest pace in more than a year.

Thailand is likely to slow the global trend of growth next year, driven by a resurgent tourism sector that will help boost local demand, Bank of Thailand Governor Sethaput Suthiwartnarueput said earlier last month.

The baht posted its biggest one-day gain in more than 15 years last month, boosted by the possibility of slower US Federal Reserve tightening and easing of COVID-19 restrictions in China.

Separately, Indonesia’s central bank is ready to raise interest rates further and boost short-term bond yields to support the rupiah in the coming year, Bank Indonesia Governor Perry Warjiyo said.

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The rupiah, Asia’s worst performer this quarter, should rebound next year on the back of recovery momentum and Indonesia’s cooling, Warjiyo said at the central bank’s annual meeting yesterday.

The monetary authority would continue its “triple intervention” strategy and buy up bonds on the secondary market to maintain “competitive” yields, he said.

Indonesia’s currency weakened to a two-year low, even though the central bank tightened by half a point earlier last month, taking the benchmark rate to levels before COVID-19.

Amid the global turmoil, the governor doubled down on Bank Indonesia’s “front-loaded, forward-looking and forward-looking interest rate policy” to anchor “excessive” inflation expectations, with the aim of returning the core rate to its 2 to 4 percent. Aim early in the first half of next year.

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Policymakers would also continue to use macroprudential measures to support growth. Bank Indonesia extends looser rules on home and car loans, as well as lower reserve requirements for bank loans to priority sectors.

It confirmed its estimate for GDP to expand 4.5 to 5.3 percent next year, driven by exports, consumption and investment.

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