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Govt & Bank of Thailand Conflict: Two sides to story

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Most monetary policy experts at BOT don't believe interest rate cut will solve rising baht problem so charges of "gross incompetence" unfounded. 

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CENTRAL BANKING

PM pledges to end baht row

Pridiyathorn urges govt to give BoT full support
8 May 2013
Parista Yuthamanop

Prime Minister Yingluck Shinawatra gave reassurances Tuesday that the government would find ways to resolve its differences with the Bank of Thailand (BoT) in handling the soaring baht.

She admitted that the central bank operates under a law which protects it from political interference and monetary policy was determined by the BoT's Monetary Policy Committee (MPC). 

The government would keep on talking to the central bank, she said.

MR Pridiyathorn Devakula, a former deputy premier, ex-finance minister, and former BoT governor said past actions to rein in the baht had been undermined by poor coordination between the government and the BoT, causing investors to wonder if the country is ready to implement measures to solve the problem.

He insisted the government must give the central bank full support in its moves to curb the baht.

The Finance Ministry and the central bank have been locked in a conflict over how to handle the baht's strength.

The ministry has applied pressure on the BoT relentlessly to cut the benchmark interest rate, but the MPC has kept the rate steady at 2.75% since mid-November.

The majority of the MPC members view that interest rate cuts are not an effective means to curb foreign capital inflows while the remainder believe the MPC can cut the policy rate and use supervisory measures as a supplementary tool to control asset prices.

The ministry is reluctant to implement measures to curtail capital inflows out of concerns that its borrowing costs could increase from a rise in long-term bond yields.

The conflict between the government and the central bank culminated when the ministry officially warned BoT governor Prasarn Trairatvorakul in mid-February to take responsibility if his failure to convince the MPC to cut the policy rate led to economic damage.

MR Pridiyathorn said the central bank gave priority to market mechanisms in correcting the baht rather than intervening in the market when investors poured short-term foreign capital into short-duration bonds during the first few weeks of January.

The central bank attributed the strengthening of the baht early this year to an improvement in sentiment from the resolution of the fiscal crisis in the US, an upward revision of the Thai economic outlook and foreign investors' settlements with local mutual funds.

Capital inflows to the bond market eased in February amid uncertainties in the Eurozone before doubling in March.

They declined again in April as investors became concerned over possible measures by the authorities and reacted by selling local bonds.

The baht surged 6% against the dollar from the beginning of the year to 28.5 to the dollar in the third week of April.

Since then the central bank has stepped up its purchases of dollars on the foreign exchange market. Subsequently, the baht has eased.

The weakening of the baht by more than 1.10 from 28.50 to the dollar so far shows the central bank has been serious in its efforts to rein in the currency value, MR Pridiyathorn said.

The authorities are expected to implement a set of measures ranging from an interest rate cut, which is the least effective, to outright taxation on capital inflows in curbing the baht's appreciation, he added.

The baht is expected to continue to face upward pressure amid the trends of growing Asian economies and stagnant US and European ones, MR Pridiyathorn said.

The authorities should ensure the baht moves in an orderly fashion, rather than straying beyond the range of other currencies in the region. This requires the ministry and the central bank to act with unity so that they will be able to cope with the baht strength over the long run, he added.

MR Pridiyathorn said the baht's 3.46% strengthening since the beginning of the year did not justify the charge of gross incompetence the government has levelled at Mr Prasarn, which could lead the BoT's board to dismiss him from his post.

The baht appreciated by two baht from 39 to 37 to the dollar in 2009 because the Finance Ministry did not give the central bank a full bond issue quota to absorb liquidity, he said.

In 2009, the BoT law was amended to allow the central bank to issue bonds without having to seek the ministry's approval .

The baht appreciated by a total of 20% against the dollar between 2001 and September 2006 during MR Pridiyathorn's tenure as BoT governor or around 4.5% a year. The baht strengthened afterwards until September 2010 by 24%, or by 4% under the previous central bank governor Tarisa Wattanagase.

(Source: Bangkok Post, CENTRAL BANKING, PM pledges to end baht row, Pridiyathorn urges govt to give BoT full support, 8 May 2013, Parista Yuthamanop, link


Central Bank Vocabulary

central bank - the main bank in a country that controls the supply of loans and money and provides financial services to the government and other banks (See Wikipedia)

The government would keep on talking to the central bank, she said.

criticism  - looking at something in detailm studying and analyzing and findind any problems or faults something may have การประเมินผลงาน, การวิจารณ์, บทวิจารณ์, การวิเคราะ

unjustified - wrong or not deserved
criticism unjustified

justified - right and deserved
criticism justified

Pridiyathorn: Prasarn criticism unjustified

pledges - to make a promise
PM pledges to end baht row Pridiyathorn urges govt to give BoT full support

support - help, by giving money, for example สนับสนุน

resolve - find a solution to and solve a problem, difficulty, or argument หาทางแก้ปัญหา แก้ไขปัญหา
resolve differences

reassurances - to tell someone not to worry (what they are expecting or what has been promised will happen, for sure)
gave reassurances that ..

soar - to increase very quickly (like a bird "soaring" into the air)
the soaring baht

handle - to solve or try to solve a problem (or at least make it less of a problem)
handling the soaring baht

Prime Minister Yingluck Shinawatra gave reassurances Tuesday that the government would find ways to resolve its differences with the Bank of Thailand (BoT) in handling the soaring baht.

interference - the process of deliberately becoming involved in a situation and trying to influence the way that it develops การเข้าแทรกแซง
political interference - when politicians try to change or influence things they should not be  

policy - a plan of action to guide decisions and achieve outcomes นโยบาย(See Wikipedia)
monetary policy - the way in which a government or central bank controls the supply of money and credit in an economy

Y determines X (active) -
Y makes X 
X determined by Y (passive) - X is made by Y
monetary policy was determined by ...

admitted - to say accept that something is true (even though it is difficult to accept) 
She admitted that ...

She admitted that the central bank operates under a law which protects it from political interference and monetary policy was determined by the BoT's Monetary Policy Committee (MPC). 

deputy - a person who is given the power to do something instead of another person, or the person whose rank is immediately below that of the leader of an organisation รอง, ตัวแทน,ผู้รักษาการแทน
premier - prime minister
deputy premier

finance - to provide money for something จัดหาเงินทุนให้
finance minister

former - was before, but not now
former deputy premier
former BoT governor

ex - was before, but not now
ex-finance minister

rein in - to control
rein in the baht

coordination - working together in an efficient manner; he act of making all the people involved in a plan or activity work together in an organised way; organising the activities of two or more groups so that they can work together towards a goal การประสานกัน การประสานงานกัน
poor coordination

undermined - weakened
undermined by poor coordination
past actions had been undermined by poor coordination

implement - put a plan into action, make a plan work นำมาใช้,  นำ แผนหรือนโยบายมาปฏิบัติ
measures - actions taken to solve a problem มาตรการ
implement measures
ready to implement measures to solve the problem.

MR Pridiyathorn Devakula, a former deputy premier, ex-finance minister, and former BoT governor said past actions to rein in the baht had been undermined by poor coordination between the government and BoT, causing investors to wonder if the country is ready to implement measures to solve the problem.

insisted - say firmly that something must happen or is true, and will not change mind
curb - stop or reduce ลดหรือยุติ stop or reduce something a lot ระงับ ควบคุม

He insisted the government must give the central bank full support in its moves to curb the baht

conflict - an angry disagreement between people or groups ความขัดแย้ง ความไม่ลงรอยกัน
locked in conflict - having a disagreement, argument or fight that is difficult to end (like it is difficult to open a lock)

The Finance Ministry and the central bank have been locked in conflict over how to handle the baht's strength.

pressure - a force causing change; trying to force someone to do something ความกดดัน
applied pressure 

relentlessly - (of something bad) never seeming to stop or improve อย่างไม่ผ่อนปรน
applied pressure relentlessly

interest - payments made for the use of another's money for a period of time
rate
- อัตรา
interest rate

benchmark - a standard that other things can be compared to and measured by
the benchmark interest rate
cut the benchmark interest rate

steady - to be continuous at a certain level without stopping
kept the rate steady at 2.75%

ministry - a government department dealing with an area of activity กระทรวง

The ministry has applied pressure on the BoT relentlessly to cut the benchmark interest rate, but the MPC has kept the rate steady at 2.75% since mid-November.

majority - more than 50 percent of a group;  more than half of the people in a group ส่วนมาก  เสียงส่วนมาก  คนส่วนใหญ่ ส่วนใหญ่
the majority believes ....
the majority of the MPC members believe ...

remainder - the part of something that is left after that rest have been considered, left, finished, etc. ส่วนที่เหลืออยู่
the remainder believe ...
the remainder of the MPC members believe ...

capital - investment money; money invested in businesses
foreign capital - investment money from other countries
foreign capital inflows - investment money from other countries coming into Thailand

curb -
stop or reduce
curb foreign capital inflows

effective - works well, gets the job done; producing the result that was intended ได้ผลดี 
means - methods; ways วิธี, วิธีการ
effective means to ...
an effective means to curb foreign capital inflows
interest rate cuts are not an effective means to curb foreign capital inflows

supervise
(verb)
supervisory
(adjective)
supervisory measures

asset - something owned by a person, company etc., particularly money and property ทรัพย์สิน
asset prices
control asset prices

supplementary
- extra; additional เพิ่มเข้ามา
a supplementary tool
a supplementary tool to control asset prices

 the MPC can cut the policy rate and use supervisory measures as a supplementary tool to control asset prices

The majority of the MPC members view that interest rate cuts are not an effective means to curb foreign capital inflows while the remainder believe the MPC can cut the policy rate and use supervisory measures as a supplementary tool to control asset prices

curtail - stop
curtail capital inflows - stop investment money coming into country
measures to curtail capital inflows

bond - a way of borrowing money from many people (bondholders); an agreement by a government or an organization to pay back the money an investor has lent plus a fixed amount of interest on a particular date; a document containing this agreement (See Wikipedia)

yield - the total amount of profits or income that you get from an investment or from a business
bond yield -

term - a period of time ช่วงเวลา
long-term bond yields

concerns - worries ความกังวล
out of concerns that

reluctant - do not want to do something (so are slow, hesitate, or do without enthusiasm) not willing to do something ลังเลใจ not very willing to do something and therefore slow to do it ไม่เต็มใจ

The ministry is reluctant to implement measures to curtail capital inflows out of concerns that its borrowing costs could increase from a rise in long-term bond yields.

responsibility - 1. being blamed for something that goes wrong, 2. having to take care of some task as part of your job
take responsibility - taking the blame for something bad that happened (and resigning from job, leaving position)

convince - msaying things to make a person believe something or do something
convince the MPC to cut the policy rate

The conflict between the government and the central bank culminated when the ministry officially warned BoT governor Prasarn Trairatvorakul in mid-February to take responsibility if his failure to convince the MPC to cut the policy rate led to economic damage.

market mechanisms - markets acting alone through supply and demand (without government acting to influence supply and demand) 
intervene in the market - when the central bank buys and sells assets (bonds, currencies, etc) to control economic variables such as the exchange rate or domestic interest rate

priority - something important that must be done first สี่งที่สำคัญเป็นลำดับแรก
gave priority to market mechanisms in correcting the baht

duration
- length of time it exists for
short-duration bonds

MR Pridiyathorn said the central bank gave priority to market mechanisms in correcting the baht rather than intervening in the market when investors poured short-term foreign capital into short-duration bonds during the first few weeks of January.

attributed X to Y - to say that X was caused by Y
the central bank attributed the strengthening of the baht to

improvement - when something gets better or when you make it better การปรับปรุง, การทำให้ดีขึ้น
sentiment - feelings; an attitude or belief that people have based on their thoughts and feelings อารมณ์ทางความคิด, กระแส, แนวความคิด
improvement in sentiment

fiscal - related to government spending; connected with the government budget, i.e., public money เกี่ยวกับงบประมาณ
crisis - an urgent, difficult or dangerous situation วิกฤตการณ์ วิกฤต
fiscal crisis - a crisis in which the government has a big problem paying for government spending

resolution - solving a problem
the resolution of the fiscal crisis in the US

an improvement in sentiment from the resolution of the fiscal crisis in the US

outlook - what people think will happen in the future อนาคตที่คาดไว้ how good or bad things it seems things will be in the future ภาพรวม อนาคต
economic outlook

revision - a change, improvement or addition that someone makes to something like a plan or document การปรับปรุงใหม่, การแก้ไขใหม่
upward revision

an upward revision of the Thai economic outlook

mutual fund - an investment fund that invests money for a large gruop of investors in a wide range of shares, bonds, etc. the investment fund is divided into small units which are bought and sold, usually by people who only invest a small amount of money (See Wikipedia)
local mutual funds - mutual funds in this country (Thailand)

funds - money collected for a special purpose (for investment in companies or projects) เงินทุน

settlement - the action of paying money for something (completing a "financial transaction")
foreign investors' settlements with local mutual funds

The central bank attributed the strengthening of the baht early this year to an improvement in sentiment from the resolution of the fiscal crisis in the US, an upward revision of the Thai economic outlook and foreign investors' settlements with local mutual funds.

eased - decreased
capital inflows eased

amid ... - happening at the same as ....
uncertainty -
not knowing what happened, is happening or will happen in the future
amid uncertainties

Capital inflows to the bond market eased in February amid uncertainties in the Eurozone before doubling in March.

authorities - government officials; the police or people in official organisations who have the legal power to make people obey laws or rules เจ้าหน้าที่ (ตำรวจ หรือผู้มีอำนาจ)
measures by authorities

concerned - worried about something มีความกังวล
concerned over possible measures by the authorities

They declined again in April as investors became concerned over possible measures by the authorities and reacted by selling local bonds.

surge - a sudden increase in something การเพิ่มขึ้นอย่างรวดเร็ว
The baht surged 6% against the dollar from the beginning of the year to 28.5 to the dollar in the third week of April.

foreign exchange - 
the system of exchanging the money of one country for that of another
foreign exchange market

step up - increase
step up purchases of dollars
stepped up its purchases of dollars on the foreign exchange market

Since then the central bank has stepped up its purchases of dollars on the foreign exchange market.

ease -
weaken, grow less strong
baht eases -
baht weakens

subsequently, ... - after that ...
Subsequently, the baht has eased.


efforts - people trying to accomplish something, achieve a goal ความพยายาม
serious in its efforts

rein in - control, reduce speed or stop (like pulling in the "reins" of a horse to slow down or stop the horse)
currency - a widely used the money accepted for exchange of goods in an economy เงินตรา (See Wikipedia)
rein in the currency value

The weakening of the baht by more than 1.10 from 28.50 to the dollar so far shows the central bank has been serious in its efforts to rein in the currency value, MR Pridiyathorn said.

outright - complete and total, open and direct (not hidden)
outright taxation

curb -
reduce or stop something bad
appreciation
- when a country's currency becomes more valuable compared to the currencies of other countries (which makes goods exported from the country more expensive)
curbing the baht's appreciation

outright taxation on capital inflows in curbing the baht's appreciation, he added.

expected
- believe will happen คาดว่า (จะเกิดขึ้น)

The authorities are expected to implement a set of measures ranging from an interest rate cut, which is the least effective, to outright taxation on capital inflows in curbing the baht's appreciation, he added.

The baht is expected to continue to face upward pressure amid the trends of growing Asian economies and stagnant US and European ones, MR Pridiyathorn said.

orderly
fashion
in an orderly fashion

ensure - to make certain that something happens or is done รับรอง ให้ความมั่นใจ ให้การยืนยัน
ensure the baht moves in an orderly fashion

stray
range
straying beyond the range of other currencies in the region.

act with unity
requires the ministry and the central bank to act with unity

cope - deal with a problem (make it manageable, not always solve problem); to deal successfully with a difficult situation รับมือกับ
cope with the baht strength over the long run

The authorities should ensure the baht moves in an orderly fashion, rather than straying beyond the range of other currencies in the region. This requires the ministry and the central bank to act with unity so that they will be able to cope with the baht strength over the long run, he added.

gross - extreme and unreasonable เลวร้าย
incompetence
gross incompetence

charge - to accuse someone officially of committing a crime ตั้งข้อกล่าวหา
the charge of gross incompetence

justify - provide a reason for; to show that there is good reason for something แสดงเหตุผลที่ดีพอ
justify the charge of gross incompetence

post - an official position or job
dismiss - to force someone to leave their job ไล่ออกจากตำแหน่ง
dismiss from post

board - board of directors, the group of people who make the high level decisions that control how an organization operates, that make high-level policy and make hiring decisions for upper management

could lead the board to dismiss him from his post

MR Pridiyathorn said the baht's 3.46% strengthening since the beginning of the year did not justify the charge of gross incompetence the government has levelled at Mr Prasarn, which could lead the BoT's board to dismiss him from his post

issue
- offering securities (stock shares, bonds) for sale
bond issue

absorb - 1. to take something and reduce it; 2. to take in a liquid, gas or other substance form the surface or space around ซึมซับ ดูดกลืน
liquidity - the availability of cash in the economy (through loans) to businesses and consumers (to meet their needs) สภาพคล่อง

absorb
liquidity
bond issue to absorb liquidity

quota - the limited quantity officially allowed
a full bond issue quota
a full bond issue quota to absorb liquidity

The baht appreciated by two baht from 39 to 37 to the dollar in 2009 because the Finance Ministry did not give the central bank a full bond issue quota to absorb liquidity, he said.

amend - change
amend a law - change a law
the BoT law was amended


approval
- official permission การอนุมัต
the ministry's approval 
seek the ministry's approval

In 2009, the BoT law was amended to allow the central bank to issue bonds without having to seek the ministry's approval .

tenure - the period of time during which someone has an important job ช่วงระยะเวลาที่ดำรงตำแหน่ง
MR Pridiyathorn's tenure as BoT governor

The baht appreciated by a total of 20% against the dollar between 2001 to September 2006 during MR Pridiyathorn's tenure as BoT governor or around 4.5% a year. The baht strengthened afterwards until September 2010 by 24%, or by 4% under the previous central bank governor Tarisa Wattanagase.

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