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Economics

IMF lauds BoT's crisis management

Inflation targeting 'mitigated damage'
29/08/2012
Parista Yuthamanop

The International Monetary Fund has credited the Bank of Thailand's inflation-targeting framework with mitigating the economic impact from the three major shocks that occurred from 2008-11.

In a private note to the central bank dated earlier this month, the IMF said economic losses stemming from the global financial crisis, the Japanese earthquake and tsunami and the Thai flood crisis during this period would have equalled 4% of gross domestic product if the inflation targeting framework and managed float of the foreign exchange system had not been in place.

The note focused on assessing the country's inflation-targeting framework.

In it [the private note], the IMF reached the same conclusion as independent evaluators Stephen Grenville, a former deputy governor of the Reserve Bank of Australia, and Takatoshi Ito, an economics professor at the University of Tokyo, in 2010.

They praised the Bank of Thailand for its inflation-targeting performance, monetary policy accountability and external communications.

A debate has emerged locally about whether the inflation-targeting framework is the most suitable and if the country should focus more on growth and less on inflation.

The inflation-targeting framework forced the central bank to accumulate operating losses deriving from a money market operation to stabilise the baht.

The framework usually results in accounting losses on the central bank's books.

Under it [inflation targeting], interest rates are linked closely to inflation, and if prices are within the target range, they [the interest rates] may remain at a high level relative to that of other countries.

The high interest rates in turn lure foreign capital inflows, resulting in excess liquidity that calls for the central bank to "sterilise" the money market, buying foreign currencies to keep foreign exchange rates at desired levels and maintaining the country's competitiveness.

The central bank maintains it must stick with its mandate of keeping inflation stable and low.

The IMF said economic-growth and inflation rates in countries that have adopted an inflation-targeting framework is better than in countries using alternative frameworks.

Inflation targeting is globally recognised as a major factor behind low and stable inflation over the past decade, with the rate reduced by five percentage points in countries where it has been applied, it said.

The framework is flexible enough to accommodate other objectives that support growth, especially when there are shocks that need addressing, while returning inflation to within the desired range over the medium term.

"The IMF's Research and Monetary and Capital Markets departments have been working with [Bank of Thailand] staff to further strengthen its IT framework and see Thailand as one of the better examples of the successful implementation of an [inflation-targeting] framework among emerging markets," the IMF said in the note.

In 1989, New Zealand became the first to adopt inflation targeting, and since then a total of 29 countries have adjusted their monetary policy to fit this framework.

The European Central Bank, the Swiss National Bank, the Bank of Japan and the US Federal Reserve implement monetary policy frameworks in which inflation targeting features prominently.

Successful implementation of such a framework requires a sound fiscal position, a strong financial system and the absence of overindebtedness in US-dollar terms, said the IMF's note.

(Source: Bangkok Post, Economics, IMF lauds BoT's crisis management, Inflation targeting 'mitigated damage', 29/08/2012, Parista Yuthamanop, link) 


Monetary Policy Vocabulary

International Monetary Fund (IMF) - an organization of 188 countries working for global monetary cooperation, to secure financial stability, help international trade, promote high employment and sustainable economic growth, and reduce poverty,  Its headquarters are in Washington, D.C. (See Wikipedia)

headquarters - the central place or offices from which an organization is managed and controlled
International Monetary Fund (IMF) headquarters

lender of last resort - the role of a country's central bank when it lends money during a crisis to banks that need loans and can't get them  (See Wikipedia and article and academic paper)

monetary policy - the policy by which a central bank controls the amount of money available in the economy (money supply) and credit (loans) in an economy (See Wikipedia)

policy - a plan of action to guide decisions and achieve outcomes นโยบาย (See Wikipedia)

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

Bank of Thailand  - Thailand's central bank (See website)

inflation - the level of prices rising in the economy as a whole  ภาวะเงินเฟ้อ
target - a goal; the amount you are planning to achieve เป้าหมาย

inflation targeting - (See Wikipedia)
framework - a system of rules, ideas or beliefs that is used to plan or decide something ขอบข่ายงาน, โครงร่าง
the Bank of Thailand's inflation-targeting framework

crisis - an urgent, difficult or dangerous situation วิกฤต  วิกฤตการณ์
crisis management - dealing with a difficult situation successfully

laud - praise
IMF lauds BoT's crisis management

mitigate damage - reduce or control damage from a bad event

inflation targeting 'mitigated damage'

credited X with Y - said that X was the reason that good thing Y happened
impact - an effect or influence ผลกระทบ

economic shock -  an unexpected or unpredictable event that affects an economy, either positively or negatively (example: a negative economic shock of a sharp increase in oil prices) (See Wikipedia)

mitigating the economic impact from the three major shocks that occurred from 2008-11

The International Monetary Fund has credited the Bank of Thailand's inflation-targeting framework with mitigating the economic impact from the three major shocks that occurred from 2008-11.

private - not for the public, not for everyone (for one or a few people)
private note

stemming from - coming from, caused by 

global - throughout the world ทั่วโลก
global financial crisis

earthquake - a sudden shaking movement of the ground แผ่นดินไหว
Japanese earthquake and tsunami
Thai flood crisis

Gross Domestic Product (GDP) - the total value of all the goods and services produced by a country in one year (See Wikipedia)

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

floating exchange rate - when the exchange rate for a currency is not controlled by the government but changes as the demand for the currency changes (See Wikipedia)

managed float - when the government intervenes and buys or sells currency to keep the exchange in a certain range, to keep the baht low, Thai exports cheap and exporters happy, for example (See Wikipedia)

managed float of the foreign exchange system
in place

In a private note to the central bank dated earlier this month, the IMF said economic losses stemming from the global financial crisis, the Japanese earthquake and tsunami and the Thai flood crisis during this period would have equalled 4% of gross domestic product if the inflation targeting framework and managed float of the foreign exchange system had not been in place.

conclusion - something that you decide is true after consider all the evidence and thinking about it carefully การสรุป,บทสรุป
reach a conclusion

independent - free from outside influence เป็นอิสระ not taking help or money from other people พึ่งตนเอง
independent evaluators

the IMF reached the same conclusion as independent evaluators

The note focused on assessing the country's inflation-targeting framework. In it, the IMF reached the same conclusion as independent evaluators Stephen Grenville, a former deputy governor of the Reserve Bank of Australia, and Takatoshi Ito, an economics professor at the University of Tokyo, in 2010.

praised - say good things about another person and the things they have done

performance - how well or badly something works (or whether an investment provides a reasonable return)
inflation-targeting performance

accountability - being responsible for an activity and able to explain and justify it; a situation where people have the right to ask you about or criticise you for something that has happened ความน่าเชื่อถือ
monetary policy accountability

external - outside
external communications - telling the public about policy (public = outside; staff = inside)

They praised the Bank of Thailand for its inflation-targeting performance, monetary policy accountability and external communications.

debate - a discussion or formal argument on an issue between people with different views (See Wikipedia)
emerged - come into being; appeared ปรากฏออกมา
a debate has emerged locally

suitable - right for a situation; acceptable or right for someone or something เหมาะสม

focus - the main thing it is concerned with ให้ความสำคัญ
focus more on growth and less on inflation.

A debate has emerged locally about whether the inflation-targeting framework is the most suitable and if the country should focus more on growth and less on inflation.

accumulate - to get more and more of something over a period of time สั่งสมมานาน
accumulate operating losses

deriving from - coming from, made from

stabilise - to reach a state where there are no longer any major changes or problems ทำให้มีเสถียรภาพ
stabilise the baht

money market - the activity of banks buying and selling short loans between banks in securities such as certificates of deposit  which is money borrowed by banks for short periods or treasury bills which money borrowed by governments for short periods 

money market operation
a money market operation to stabilise the baht.

The inflation-targeting framework forced the central bank to accumulate operating losses deriving from a money market operation to stabilise the baht.


results - what is produced in the end by an activity or task
results in
accounting - the work of keeping and checking financial records for a company or organization (See Wikipedia)
accounting losses
books - accounting records (accounting "books")
on the central bank's books

The framework usually results in accounting losses on the central bank's books.

interest - payments made for the use of another's money for a period of time
linked - connected เชื่อมโยง เกี่ยวกับ
interest rates are linked closely to inflation
range - a number of different things that are of the same general type ขอบข่าย
range - a number of different things that are of the same general type ขอบข่าย, ประเภท
prices are within the target range
remain at a high level relative to that of other countries

Under it, interest rates are linked closely to inflation, and if prices are within the target range, they may remain at a high level relative to that of other countries.

in turn
lure - to persuade someone to do something by making seem very attractive หลอกล่อ
lure - something that attracts you, makes you do something or go some place
lure - persuade someone to do something by making it look very attractive (See glossary)
lure - make people go to a place or do something by using a trick
capital - money invested in a business
lure foreign capital inflows
excess - greater than is usual; too much of something มากเกินปริมาณที่พอดี
liquidity - 1. the availability of cash in the economy (through loans) to businesses and consumers (to meet their needs); 2. having enough cash (or assets convertable to cash) to continue in business and continue paying off debt and liabilities สภาพคล่อง

sterilization (noun) - (See Wikipedia)
sterilise (verb)

"sterilise" the money market

resulting in excess liquidity that calls for the central bank to "sterilise" the money market

competitiveness - how well a business can do compared to other firms (does it have lower price or higher quality?) การแข่งขัน

buying foreign currencies to keep foreign exchange rates at desired levels and maintaining the country's competitiveness

The high interest rates in turn lure foreign capital inflows, resulting in excess liquidity that calls for the central bank to "sterilise" the money market, buying foreign currencies to keep foreign exchange rates at desired levels and maintaining the country's competitiveness.

keeping inflation stable and low

stable - not changing frequently and not likely to suddenly become worse มั่นคง
stable - not changing frequently and not likely to suddenly become worse คงที่, มั่นคง
stable - not changing suddenly or a lot, therefore predictable and easy to work with
stable - firmly fixed, not likely to move or change a lot, not likely to fail คงที่ ไม่เปลี่ยนแปลง
stick with its mandate of keeping inflation stable and low

alternative - another choice ตัวเลือก / ทางเลือก
alternative - something that is different from something else, especially from what is usual, and offering the possibility of choice ทางเลือก
frameworks - a structure and system for doing some activity
alternative frameworks




The central bank maintains it must stick with its mandate of keeping inflation stable and low. The IMF said economic-growth and inflation rates in countries that have adopted an inflation-targeting framework is better than in countries using alternative frameworks.





globally - throughout the world ทั่วโลก
factor - a fact or situation which influences the result of something ปัจจัย

globally recognised as
major factor

decade - a period of ten years ทศวรรษ, ระยะเวลา 10 ปี

low and stable inflation over the past decade
countries where it has been applied

Inflation targeting is globally recognised as a major factor behind low and stable inflation over the past decade, with the rate reduced by five percentage points in countries where it has been applied, it said.

support - help, by giving money, for example สนับสนุน
support growth - help the country grow

objectives - goals; aims; things that you plan to achieve จุดมุ่งหมาย
objectives that support growth

accommodate - do things to meet or satisfy needs; prepare what is needed  ปรับตัว
accommodate other objectives that support growth

flexible - can change easily to meet new conditions
flexible enough to

the framework is flexible enough to accommodate other objectives that support growth

address a problem - deal with and try to solve a problem

shocks that need addressing
returning inflation to within the desired range over the medium term.

The framework is flexible enough to accommodate other objectives that support growth, especially when there are shocks that need addressing, while returning inflation to within the desired range over the medium term.

staff - employees of a company, people who work for a company พนักงาน
Bank of Thailand staff

implement - put a plan into action, make a plan work
implement monetary policy frameworks

implementation - making a plan into reality; actually do or carry out a plan นำมาใช้ นำ แผนหรือนโยบายมาปฏิบัติ
successful implementation

adopt - to accept or to start using something new นำมาใช้
adopt inflation targeting

fit - works with, goes together well with
fit a framework
adjusted their monetary policy to fit this framework.

... features prominently - ... is a very visible and important part

"The IMF's Research and Monetary and Capital Markets departments have been working with [Bank of Thailand] staff to further strengthen its IT framework and see Thailand as one of the better examples of the successful implementation of an [inflation-targeting] framework among emerging markets," the IMF said in the note. In 1989, New Zealand became the first to adopt inflation targeting, and since then a total of 29 countries have adjusted their monetary policy to fit this framework. The European Central Bank, the Swiss National Bank, the Bank of Japan and the US Federal Reserve implement monetary policy frameworks in which inflation targeting features prominently.

financial position - the financial situation of a person, company or organization (the assets, liabilities, and net worth)

fiscal - related to government spending; connected with the government budget, i.e., public money เกี่ยวกับงบประมาณ
fiscal position - the financial situation of the government (assets, liabilities, and net worth)

sound - in good condition; healthy แข็งแรง
sound fiscal position

over - too much
overindebtedness - the condition of owing people too much money (borrowed a lot of money and have to pay it back in the future)
in US-dollar terms - measured in US dollars

absence - not existing or being present at a place การหายไป ไม่ปรากฏตัว
absence of overindebtedness in US-dollar terms

Successful implementation of such a framework requires a sound fiscal position, a strong financial system and the absence of overindebtedness in US-dollar terms, said the IMF's note.