Thailand need not reduce interest rates immediately after the Federal Reserve eased policy as its economic outlook remains unchanged, the chief of its central bank said on Friday, while stressing its independence amid government pressure for a cut.

Bank of Thailand (BOT) governor Sethaput Suthiwartnarueput also said reducing borrowing costs would not help the country's debt problems, pushing back at a government that contends the current policy rate is hamstringing its efforts to revive the stuttering economy.

Thailand's key interest rate has been at 2.50% for a year, a decade-high, and the BOT has resisted calls for easing in an extended stand-off with the government as it struggles to kick-start an economy that grew just 1.9% in 2023 and is forecast to expand just 2.6% this year.

"The policy is still outlook-dependent. The current outlook is still the same as forecast. Nothing has changed," Sethaput told reporters, adding an off-cycle meeting before the next rate review on Oct 16 was not necessary.

"If we focus too much on the latest information, there will be a lot of volatility. We don't want monetary policy expectations to exacerbate market volatility," he added.

Rate cuts, Sethaput said, would not help with Thailand's problem of household debt, where the ratio is close to 91% of gross domestic product, among the highest in Asia.

The issue should be addressed with a policy mix, including debt restructuring for vulnerable groups, Sethaput said.

Short-term boost, long-term problem

In remarks at a BOT symposium on Friday, Sethaput underlined the importance of central banks remaining independent.

"Central banks are designed to support the implementation of monetary policies that must give weight to long-term stability," he said.

"If central banks are not independent enough, they may lose the principle of long-term vision."

While lower interest rates could raise short-term growth, there was a trade-off with inflation and that could create vulnerabilities such as debt accumulation and speculation, he added, constraining long-term growth and risking a crisis.

The governments of Prime Minister Paetongtarn Shinawatra and predecessor Srettha Thavisin have urged a rate cut to augment their fiscal stimulus, including the imminent rollout of a flagship scheme to give 10,000 baht (US$302 or RM1,265) handouts to 45 million Thais to spur activity.

The BOT chief's remarks come just weeks after the rise to power of Paetongtarn, who earlier this year said central bank independence was an obstacle to solving economic problems.

It also comes as her ruling Pheu Thai Party nominates its loyalist Kittiratt Na Ranong, a former finance minister with a record of clashing with the central bank, to be the next BOT board chairman, as reported this week by Reuters.

The BOT board chair has no say in monetary policy, but is involved in appointments of governors and the monetary policy committee.

Sethaput also said the BOT was monitoring the baht, which has become stronger and more volatile, driven by a weaker dollar, he said, adding the baht's strength had not impacted exports much.

"We don't want the baht to be overly volatile," he added.

Source: Theedgemarkets

Pre-Market U.S. Stock Movers

Source: Barchart

GIC Pte Ltd group chief investment officer (CIO) Jeffrey Jaensubhakij has warned that the market exuberance following Wednesday’s outsized interest-rate cut could be short-lived amid the risk of rising inflation.

“For now, we should enjoy it,” Jaensubhakij said at the Milken Institute Asia Summit 2024. “But just be prepared that you have tight labour markets across the US, Europe, Japan, and so the risk of inflation coming back sooner may be there.”

The sovereign wealth fund investor said that with a US election cycle underway, politicians could push unnecessary stimulus into the market, in an effort to win votes.

Jaensubhakij’s comments were broadly reflective of a panel that provided tips for other investors on surviving a potential downturn. He added that many of the companies GIC had backed need to borrow funds and wanted rates to drop further. 

“In some ways, the interest-rate markets are saying [that] you need to cut rates by enough, as if we’re going into a recession, but the equity markets on the other hand still say we’re going to re-accelerate the economy and earnings growth is going to come back,” he said. “Only one of them will be right.”

Speaking on the same panel, Hillhouse founder Zhang Lei suggested using technology to enhance the skills and processes of businesses, while Granite Asia senior managing partner Jenny Lee said the days of 1,000 times in returns in Asia’s venture capital space were over.

Source: Theedgemarkets

Source: AP

US President Joe Biden said on Thursday he expects the Federal Reserve (Fed) to continue cutting interest rates and vowed that his administration would keep working to lower costs for Americans.

Biden used an Economic Club of Washington event with 500 guests to promote his administration's policies to bring down inflation after the Covid-19 pandemic and Russia's invasion of Ukraine, issues that have driven voters' anxiety.

"Interest rates are going to be coming down and they're expected to go down further. That's a good place for us to be," the president said.

Inflation is much closer to the Fed's 2% target, Biden said, calling the US central bank's half-percentage-point cut in interest rates on Wednesday "good news for consumers."

"I'm not here to take a victory lap ... We do have more work to do," Biden added.

Many economists had predicted a recession would be needed to lower high inflation, but have so far been proven wrong as Biden's policies aimed at expanding domestic manufacturing, investing in clean energy and other infrastructure, and capping drug costs for seniors helped create 16 million jobs and raised wages, Jeff Zients, the president's chief of staff, told reporters in a call.

Polls show Americans remain deeply worried about the economy and inflation, with Vice President Kamala Harris, who became the Democratic presidential nominee when Biden bowed out of the race in July, and Republican former president Donald Trump essentially deadlocked less than seven weeks before the Nov 5 US election.

A Reuters/Ipsos poll released this week showed Trump had an advantage on the issue of inflation, which surged under Biden to a 40-year high in 2022. Some 43% of voters in the poll said Trump would be more likely to "lower prices for everyday things like groceries and gas", compared with 36% who picked Harris.

Fed Chair Jerome Powell, speaking on Wednesday after the US central bank announced its oversized rate cut, said the economy remained strong but policymakers wanted to stay ahead of and stave off any weakening in the job market. The unemployment rate, now at 4.2%, is more than half a percentage point higher than it was when the Fed began an aggressive rate-hike campaign in March of 2022.

National Economic Council Director Lael Brainard said on the same call with reporters that the Fed's rate cut sent a "clear signal that inflation has come back down," noting that it was now at the same level seen in the month before the Covid-19 pandemic began.

Mortgage rate reductions that have already happened would save the average home buyer US$5,000 (RM20,982) a year, with savings to increase as the rates declined further, she said.

But Brainard added that further work was needed to drive down housing costs and support childcare needs.

The White House is monitoring escalating tensions in the Middle East, but sees no significant risks to the broader economic outlook, said an administration official, who did not wish to be named.

Source: Theedgemarkets