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Politics

MPC in the hot seat over rate decision

BoT panel faces backlash whether it cuts, stays put
20 Feb 2013
Post Reporters

The Bank of Thailand's Monetary Policy Committee (MPC) will be in the hot seat when it meets Wednesday to decide whether to cut the policy interest rate.

The government has been applying pressure on the central bank to slash the rate to curb the influx of capital inflows from overseas.

Critics say the Finance Ministry's recent written request for the MPC to bring down the rate amounts to political interference in the BoT's affairs.

The central bank is duty-bound to balance the government's fiscal policies to ensure the long-term economic stability of the country with its monetary policy.

"[The government's move] puts pressure on the the MPC over its decision on the policy rate," Praipol Koomsup, a Thammasat University economist, said.

Mr Praipol, who served as an MPC member two years ago, said it was unprecedented for a finance minister to send a letter to suggest a rate cut as this is an independent mission of the central bank.

He was referring to the open letter which Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong sent early this month to central bank board chairman Virabongsa Ramangkura with a recommendation that the bank bring down the policy interest rate.

The government wants the rate to be cut to slow capital inflows which have caused the baht to strengthen, thus hurting the competitiveness of Thai exports.

The battle against capital inflows has also caused the central bank to suffer huge losses, Mr Kittiratt said.

While economists are split on whether the policy rate should be cut and on whether this would stem the inflows, whatever the MPC's decision, it looks set to come under fierce criticism.

If the MPC lowers the rate as the finance minister recommends, it could be condemned for bowing to government pressure. On the other hand, it could face criticism from those being hurt by the baht's appreciation if it refuses to cut the reference rate.

"What the MPC must do Wednesday is thoroughly explain its decision. It needs to show why it has made that decision and how such a decision reflects its independence," he said

Observers have also raised concern about the MPC members as the four "outsiders" on the panel are seen as being influenced by the government.

The MPC has seven members, made up of central bank governor Prasarn Trairatvorakul, who is the panel's chairman, BoT deputy governors Pongpen Reungvirayudh and Tongurai Limpiti, cabinet secretary-general Ampon Kittiampon, former commerce minister Narongchai Akrasanee, former central bank assistant governor Siri Garnjaroendee, and Aswin Kongsiri, a former top executive at many banks.

Mr Praipol said that in his experience as an MPC member, the panel was likely to maintain its independence in deciding on monetary policy based on actual economic data.

Arkhom Termpitthayapaisit, secretary-general of the National Economic and Social Development Board (NESBD), the government's economic think-tank, said the central bank was concerned that a rate cut would bring about inflation.

"In the NESDB's view, however, inflation is not a problem at the moment. He also said that whether or not a rate cut can stem capital inflows would depend on how much it is slashed by. "It may be too little, too late," he said.

A rate cut, however, is not the only measure available for stopping money inflows, Mr Arkhom said.

Democrat leader Abhisit Vejjajiva Tuesday gave moral support to the MPC. "The MPC's stance must be kept intact," he said, adding that political interference to serve economic growth without concern for stability is dangerous. 

He said Prime Minister Yingluck Shinawatra needs to act as an intermediary to boost cooperation between the Finance Ministry and the central bank.

Former finance minister Korn Chatikavanij of the Democrats said there is no need for the MPC to cut the benchmark rate now because economic growth remains intact at about 5% this year, while the unemployment rate is lower than 1% of the workforce.

Andre de Silva, HSBC Global Research's managing director and head of Asia-Pacific rates, said the international community has a great deal of confidence in the decision-making independence of the MPC. "It will take something more dramatic to shift its view and indeed respond to pressure.

Mr de Silva said another piece of evidence that could reaffirm investor confidence in the MPC's independence was the comment made by Mr Ampon - who has served on the MPC for nine years - upon learning about the finance minister's letter to the BoT's board. Mr Ampon said he did not expect the letter to have an impact on the MPC's decision

"I understand there is pressure from the Ministry of Finance, but I don't think the MPC will cave in," he said.

Bunluasak Pussarungsri, research head of CIMB Thai Bank, predicted the MPC would maintain its policy rate at 2.75% to control a market bubble. He said the country's credibility will be affected if there is interference in the decisions of the bank and if it is subject to political pressure. 

(Source: Bangkok Post, Politics, MPC in the hot seat over rate decision, BoT panel faces backlash whether it cuts, stays put, 20 Feb 2013, Post Reporters, link

 
Monetary Policy Vocabulary

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

Bank of Thailand (BoT) - Thailand's central bank (See Wikipedia)
Monetary Policy Committee (MPC) - the group of people at the central bank who decide on monetary policy and the policy interest rate

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

inflation - the level of prices rising in the economy as a whole  ภาวะเงินเฟ้อ

inflation-targeting - the monetary policy of setting the policy interest rate to control long-term inflation, the official monetary policy of Thailand's central bank (but there is a debate about changing it); "an economic policy in which a central bank estimates and makes public a projected, or target inflation rate and then attempts to steer actual inflation towards the target through the use of interest rate changes" (See Wikipedia & Bank of Thailand)

independence - not being influenced by or dependent on other people เป็นหน่วยงานอิสระ

central bank independence - the idea that there should be limits to how an elected government can change central bank policy, to increase economic growth before an election that might lead to higher inflation in the long-term, for example (See Wikipedia)

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 influence decisions (they should not be influencing)

pressure - trying to force or push someone to do something ความกดดัน
government pressure

applying pressure on
applying pressure on the central bank

bow to - agree to what someone wants you to do (although you do not want to do it)
bowing to government pressure

autonomy - ability to make your own decisions rather than be influenced or controlled by someone else มีอำนาจอิสระในการกำหนดนโยบาย
central bank autonomy

interest
- payments made for the use of another's money for a period of time
interest rate - the price charged for using other people's money (as percentage of loan paid per year) อัตราดอกเบี้ย

policy interest rate

cut the policy interest rate

decision -  การตัดสินใจ
rate decision
interest rate decision

in the hot seat - in a difficult situation or position (making difficult decision that people will disagree with)
MPC in the hot seat over rate decision

The Bank of Thailand's Monetary Policy Committee (MPC) will be in the hot seat when it meets Wednesday to decide whether to cut the policy interest
rate.

panel - a group of people brought together to discuss, investigate, and give advice on a subject
BoT panel faces backlash

backlash - a sudden strong public reaction against something that happens, usually angry and negative ปฏิกิริยาโต้ตอบอย่างรุนแรงและทันที การสะท้อนกลับอย่างรุนแรง
faces backlash

stay put - not change anything, stay the same, remain the same, maintain current situation
BoT panel faces backlash whether it cuts, stays put

slash - (of a budget, price, etc.) to cut, especially by a large amount ตัด
slash the rate - reduce the interest rate

curb - stop or reduce; to control or limit something that is harmful ระงับ, ควบคุม
curb the influx of capital inflows from overseas.

capital - money invested in businesses
capital inflows from overseas.

influx - when things or people come into a place
influx of capital inflows from overseas

The government has been applying pressure on the central bank to slash the rate to curb the influx of capital inflows from overseas.

critic -  a person who looks for errors and shortcomings (with aim to improve) นักวิจารณ์

request -
asking for something การขอ 
written request

bring down - reduce
bring down the rate - reduce the interest rate

written request for the MPC to bring down the rate

affairs
- events and activities relating to the government, politics, economy etc of a country, region, or the world ความสัมพันธ์ระหว่างประเทศ
the BoT's affairs

amounts to political interference in the BoT's affairs

Critics say the Finance Ministry's recent written request for the MPC to bring down the rate amounts to political interference in the BoT's affairs.

duty - something that you have to do because it is part of your job, or something that you feel is the right thing to do หน้าที่, ความรับผิดชอบ
bound - tied ผูก มัดไว้
duty-bound - a person who must do something as part of their job

balance
- make sure there is enough of things needed (and not too much of any one thing)

fiscal - connected with the government spending and budget, i.e., public money เกี่ยวกับงบประมาณ
fiscal policies

stability - does not move suddenly by large amounts (in an unpredictable and surprising way) ความมีเสถียรภาพ ความมั่นคง
economic stability

economic stability of the country
long-term economic stability of the country

ensure - to make certain that something happens or is done รับรอง ให้ความมั่นใจ; ให้การยืนยัน รับรอง
ensure the long-term economic stability of the country

The central bank is duty-bound to balance the government's fiscal policies to ensure the long-term economic stability of the country with its monetary policy.

independent - free from outside influence เป็นอิสระ
mission - a long-term goal of a company or organization (a very broad and general goal) 
independent mission of the central bank

unprecedented - never having happened before ที่ไม่เคยเกิดขึ้นมาก่อน
it was unprecedented for a finance minister to send a letter to suggest a rate cut as this is an independent mission of the central bank.

recommendation - a suggestion or piece of advice about how to solve a problem, deal with a situation คำแนะนำ หรือข้อเสนอแนะ
He was referring to the open letter which Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong sent early this month to central bank board chairman Virabongsa Ramangkura with a recommendation that the bank bring down the policy interest rate.

competitiveness - how well a business can do compared to other firms (does it have lower price or higher quality?) การแข่งขัน
The government wants the rate to be cut to slow capital inflows which have caused the baht to strengthen, thus hurting the competitiveness of Thai exports.

suffer - to experience physical or mental pain
The battle against capital inflows has also caused the central bank to suffer huge losses, Mr Kittiratt said.

split - to divide ทำให้แตกแยก
split on issue - do not agree about issue
economists are split on ... - economist do not agree about this issue (have different opinions)

stem - to stop something from increasing or spreading หยุดยั้ง,ยับยั้ง,สกัด
stem capital inflows

fierce - very intense and very aggressive; mad, vicious, wild ดุร้าย, อำมหิต, โหดเหี้ยม, ป่าเถื่อน
criticism - finding fault and error in something การวิจารณ์
fierce criticism

come under fierce criticism
looks set to come under fierce criticism

While economists are split on whether the policy rate should be cut and on whether this would stem the inflows, whatever the MPC's decision, it looks set to come under fierce criticism.

condemned - criticised severely ประณาม
condemned for bowing to government pressure

If the MPC lowers the rate as the finance minister recommends, it could be condemned for bowing to government pressure.

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)

the baht's appreciation
hurt by the baht's appreciation

the reference rate
cut the reference rate
refuses to cut the reference rate


On the other hand, it could face criticism from those being hurt by the baht's appreciation if it refuses to cut the reference rate.

"What the MPC must do Wednesday is thoroughly explain its decision. It needs to show why it has made that decision and how such a decision reflects its independence," he said

concern - a worry ความกังวล
raised concern about

outsiders - person not belonging to the group (who does not know what is going on in the group) (
the four "outsiders" on the panel

Observers have also raised concern about the MPC members as the four "outsiders" on the panel are seen as being influenced by the government.

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
deputy governors

commerce - all the activities involved in buying and selling things
commerce minister
former commerce minister

executive - the highest level managers in a company

The MPC has seven members, made up of central bank governor Prasarn Trairatvorakul, who is the panel's chairman, BoT deputy governors Pongpen Reungvirayudh and Tongurai Limpiti, cabinet secretary-general Ampon Kittiampon, former commerce minister Narongchai Akrasanee, former central bank assistant governor Siri Garnjaroendee, and Aswin Kongsiri, a former top executive at many banks.

maintain - to keep รักษา
maintain independence - to stay and remain independent (and not influenced by politicians)
maintain independence in deciding on monetary policy

actual - real; existing in fact จริง
data - facts or information used for making calculations or decisions ข้อมูล
actual economic data

Mr Praipol said that in his experience as an MPC member, the panel was likely to maintain its independence in deciding on monetary policy based on actual economic data.

concerned - worried about something มีความกังวล
think-tank - an organization that does research (on a contract basis for the government, companies and other organizations)
inflation - the level of prices rising in the economy as a whole ภาวะเงินเฟ้อ

Arkhom Termpitthayapaisit, secretary-general of the National Economic and Social Development Board, the government's economic think-tank, said the central bank was concerned that a rate cut would bring about inflation.

moment - a very short period of time; a particular time or occasionชั่วขณะ, โอกาสสำคัญ
inflation is not a problem at the moment

slashed - greatly reduced something ตัดทอน
interest rate slashed

It may be too little, too late

"In the NESDB's view, however, inflation is not a problem at the moment. He also said that whether or not a rate cut can stem capital inflows would depend on how much it is slashed by. "It may be too little, too late," he said.

measure - an action taken to solve a problem มาตรการ
A rate cut, however, is not the only measure available for stopping money inflows, Mr Arkhom said.

moral - about what is right and wrong, about how people should behave
support - help สนับสนุน
moral support

stance - an attitude, view or opinion about an issue that you state clearly; position จุดยืน ความเห็น
intact - not harmed, damaged, or lacking any parts as a results of something that has happened สมบูรณ์ ไม่บุบสลาย
the MPC's stance must be kept intact

Democrat leader Abhisit Vejjajiva Tuesday gave moral support to the MPC. "The MPC's stance must be kept intact," he said, adding that political interference to serve economic growth without concern for stability is dangerous. 

intermediary - คนกลาง (ผู้ทำหน้าที่ไกล่เกลี่ย)
act as an intermediary

boost - to increase; to strengthen เพิ่ม; ทำให้มีกำลังมากขึ้น
cooperation - work together towards a goal ความร่วมมือกัน การทำงานร่วมกัน
boost cooperation - increase cooperation (create situations where people are working together more)

Prime Minister Yingluck Shinawatra needs to act as an intermediary to boost cooperation between the Finance Ministry and the central ban

benchmark - a standard for comparison and measurement
benchmark rate - the benchmark interest rate (the main interest rate used to set other interest rates)
cut the benchmark rate

remains intact
economic growth remains intact at about 5% this year

unemployment - the number of people without a job (See Wikipedia)  การว่างงาน
workforce - all the people who work for a company or in an economy แรงงาน

Former finance minister Korn Chatikavanij of the Democrats said there is no need for the MPC to cut the benchmark rate now because economic growth remains intact at about 5% this year, while the unemployment rate is lower than 1% of the workforce.

international community - governments, international organizations, banks and businesses doing business internationally
confidence - feeling sure about something ความมั่นใจ ความเชื่อมั่น
decision-making independence

the international community has a great deal of confidence in the decision-making independence of the MPC

dramatic - a sudden, surprising or very noticeable change
shift - to change or move  โยกย้าย   เคลื่อนย้าย
respond - to say or do something as a reaction to something that has been said or done ตอบสนอง, ตอบรับ

It will take something more dramatic to shift its view and indeed respond to pressure.

evidence - information that shows that something actually did happen or actually is true หลักฐาน

reaffirm - to give your support to a person, plan, idea, etc. for a second time; to strengthen ยืนยันใหม่
investor - a person or organisation that puts money into a company in exchange for a future profit นักลงทุน
reaffirm investor confidence

comment - remark, telling what you think or what your opinion is about an issue หมายเหตุ
impact - an effect or influence ผลกระทบ

Mr de Silva said another piece of evidence that could reaffirm investor confidence in the MPC's independence was the comment made by Mr Ampon - who has served on the MPC for nine years - upon learning about the finance minister's letter to the BoT's board. Mr Ampon said he did not expect the letter to have an impact on the MPC's decision

cave - a large hole in the side of a hill or under the ground ถ้ำ
cave in - stop disagreeing with someone and agree with them (after being forced to agree with them)

"I understand there is pressure from the Ministry of Finance, but I don't think the MPC will cave in," he said.

market bubble - a investment situation in the stock market or real estate (asset markets) that cannot last in which prices rise very quickly and many people make a lot of money, economic bubble, financial bubble (See Wikipedia)

credibility - believability, when many people believe that what you say is true ความน่าเชื่อถือ,ความน่าไว้วางใจ

Bunluasak Pussarungsri, research head of CIMB Thai Bank, predicted the MPC would maintain its policy rate at 2.75% to control a market bubble. He said the country's credibility will be affected if there is interference in the decisions of the bank and if it is subject to political pressure. 

About the author

columnist
Writer: Jon Fernquest
Position: Online Writer