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Thai central bank raises rates for first time since 2011

  • Regular
  • Asian Market
  • 3 months ago
  • 60

The upcoming general elections in Thailand in February 2019 may provide market instability and a lack of economic growth.

Therefore, the Bank of Thailand has decided to raise its interest rates for the first time since 2011, lifting the overnight repo rate by 0.25% to 1.75%, a reverse of the previous cut in 2015 when it cut rates from 1.75% to 1.50%.

The bank has additionally restricted mortgage-lending rules with an 80% loan-to-value limit on properties worth above $300.000 (10 million baht), as the previous low rates have made the economy fragile and not well prepared in the event of any financial turbulence.

The restriction will come into effect as of January 2019.

The Thai economy however has seen a decline of late as it fell by 3.3% in the 3rd quarter of the year, considerably lower than the previous quarter figure of 4.6% and prompting the central bank to remain positive stating the economy was in good health.

The decision has not been as unexpected as it may seem, in line with market expectations and low inflation as consumer price index climbed by 0.99% November may be the reason why oil prices have also been on the decrease and why the government has decided to address financial vulnerability rather than keeping inflation at a steady pace.

The second largest economy in Southeast Asia has followed the likes of Indonesia in tightening policies in order to shield their currencies from further declines as the Fed continues its aggressive stance.

 

Source: Smart Trend Team