Rising raw materials prices and minimum wages are pushing up costs, but price controls and interest rate increases will help limit rising prices.
Following the central bank rate hike yesterday, the leading commercial bank Bangkok Bank quickly raised the interest rate it offers depositors for their money (Read today's article).
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MPC lifts policy rate 0.25pts
Raw materials prices and minimum wage increases are pushing the costs of consumer goods manufacturers upwards. Government price controls may prevent the prices consumers face from rising at until March. Interest rate increases will also work to reduce inflation. The Bank of Thailand’s Monetary Policy Committee has increased the repurchase rate by 0.25 points, from 2.00 per cent to 2.25 per cent, to curb rising inflation, BoT assistant governor Paiboon Kittisrikangwan said on Wednesday.
Mr Paiboon said the decision was based on the current economic situation, inflation and future trends with the major aim at curbing inflation spurred by the increase in prices of consumer goods.
The policy rate increase was also aimed at returning the rate turn to a normal level. The true interest rate is still at a minus figure, even with today's raise in the RP rate, he said.
Earlier today, Federation of Thai Industries chairman Payungsak Chartsuthipol said he expected the MPC would keep the policy rate unchanged at two per cent, as it had already been increased by 0.25 last month.
Mr Payungsak said manufacturers were being hurt by the increase in daily minimum wage and prices of raw materials.
He expected the MPC to wait for a while and raise the RP rate at its next meeting instead.
Internal Trade Department director-general Watcharee Wimuktayon said the government will not allow manufacturers to raise their product prices before March this year.
"The department will not approve any price rise proposal for two months. Producers of consumer goods have already agreed to freeze their product prices until March to ease people's financial burden," Mrs Watcharee said.
Manufacturers of instant noodles, printing and writing paper, tissue paper, corrugated fiberboard, car tyres, construction materials, medicines and pesticides have asked the department to approve price increases, saying they could no longer bear the burden of surging production costs.
Thai President Foods Plc, the maker of Mama instant noodles, said costs had soared due to the rising prices of palm oil, wheat flour, vegetables and labour.
The company would be able to keep its prices at current levels for only two months more.
The company last increased the price of a packet of Mama three years ago, to six baht from five baht.
(Source: Bangkok Post, business section, MPC lifts policy rate 0.25pts, 12/01/2011, link)
inflation - the level of prices rising in the economy as a whole, resulting in a fall in the value of money (See Economist Glossary) อัตราเงินเฟ้อ ภาวะเงินเฟ้อ
curb - to stop, control or limit something that is harmful ระงับ, ควบคุม
check - Same as "check"
policy - a plan of action to guide decisions and achieve outcomes (See Wikipedia) นโยบาย
interest - payments made for the use of another's money for a period of time
interest rate - a percentage of the total amount loaned by a bank that it charges as a fee (interest) for borrowing money (the principal)
policy rate - policy interest rate, an interest rate set by the government central bank to supply the amount of credit and money in an economy นโยบายหรือการกำหนดอัตราดอกเบี้ยของแบงค์ชาติ
central bank - the government's bank that controls all the other banks in a country, sets monetary policy, maintains the stability of the national currency and money supply, sets interest rates and inflation targets, saves failing banks as a lender of last resort during times of financial crisis (See Wikipedia)
Bank of Thailand (BOT) - Thailand's central bank (Read description at Mahidol University)
monetary policy - the policy of the central bank in influencing the cost and availability of credit through interest rates and other measures, with the goals of promoting economic growth, full employment, price stability and balanced trade with other countries (See Google definitions)
Monetary Policy Committee (MPC) - the group of people in the central bank that make monthly decisions on Thailand's monetary policy คณะกรรมการนโยบายการเงิน
Repurchase Agreement, REPO - selling a security and agreeing to buy it back in the future for a fixed price, central banks use repos to provide liquidity to the financial system, they inject money into banks and the economy by buying securities from banks, agreeing to sell them back in a week or two, this controls the money supply and inflation (See The Economist)
repurchase rate - the interest rate for money borrowed (credit) with a repurchase agreement (the central bank's "policy rate")
current - of the present time ปัจจุบัน
aim - purrpose, the thing you hope to achieve by doing something เป้าหมาย จุดมุ่งหมาย
spurred - caused ก่อให้เกิด
consumer - someone who buys and uses goods and services ผู้บริโภค
consumer goods - goods that are used by individuals and families (consumers), not used in the production of other goods (examples: food, clothes, car, but not the door of a car which is a good used to make a car) (See Wikipedia)
figure - an amount of money จำนวนเงิน
minus figure - less than zero; < 0
the true interest rate is still at a minus figure - meaning: the interest rate after adjusting for rising prices (inflation) which is called the "real interest rate" before adjustment called the "nominal interest rate" (See Wikipedia)
expected - believe will happen คาดว่า (จะเกิดขึ้น)
wage - an amount of money that you earn for working, usually according to how many hours or days you work each week or month ค่าจ้าง
minimum wage - the lowest legal amount of money that can be paid to a worker for one day's work (See Wikipedia)
raw materials - materials in their natural state before being processed or used in manufacturing
meeting - when a group of people come together to discuss issues and make decisions การประชุม
proposal - a plan or suggestion for a group to consider ข้อเสนอ
freeze prices - stop prices from rising, fix prices
ease - to make or become less severe, difficult, unpleasant, painful, etc ทำให้ง่าย บรรเทา
burden - a responsibility, a difficult thing that must be done, a heavy load to carry (See glossary) ภาระ
financial burden - difficult payments that a person must make now and in the future
ease burden - make something difficult that people must do, a lot easier (here: they must pay back loans, money they borrowed, they have lots of debt)
corrrugated - having the shape of many folds or bumps running up and down the material (examples: corrugated iron roof, corrugated cardboard)
fiberboard - a building material made of wood chips, wood shavings or plant fibers compressed and bonded into a a rigid sheet or board (See Wikipedia)
construction - the work of building or making something, especially buildings, bridges, etc. การก่อสร้าง
construction materials - materials such as wood, cement, concrete and steel that are used to build homes and buildings
pesticides - poisons that are sprayed on plants to kill insects that might destroy the plants
bear - to accept, tolerate or endure especially something unpleasant ทน
bear burden - accept and endure a difficult responsibility
surging - increase suddenly and very quickly
production costs - all the things a company must buy to make (manufacture) goods such as labour, parts, raw materials (not including things such as sales people, and overhead such as office workers and accountants)
packet - a small paper or cardboard container in which a number of small objects are kept or sold ห่อของเล็กๆ
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