Investors fret over pending interest rate variance

Investors fret over pending interest rate variance

In addition to the impact of the Omicron coronavirus variant on the Thai economy, investors are concerned with capital outflows because of the widening gap in interest rates between Thailand and other countries, says Tim Leelahaphan, an economist at Standard Chartered Bank (Thai).

The bank conducted a survey of 150 corporate clients and institutional investors on their concerns about the widening policy rate gaps between Thailand and other nations, the current account deficit and political uncertainties. Most respondents said their major concern was the growing gap in policy interest rates, said Mr Tim.

The Bank of Thailand has kept its rate at 0.50%, while the US Federal Reserve rate is 0.25%. The Thai central bank is expected to maintain its rate this year, then raise it to 1% at the end of next year, he said.

Mr Tim said the apprehension should not trigger an outflow of capital yet as the Fed rate remains steady. The Fed is expected to raise its rate by 25 basis points in March as well as in June this year. These rate hikes would make the US rate higher than the Thai standard.

If the Bank of Thailand fears a capital outflow this year, it will have to raise the rate, he said. However, a rate hike should only happen when the economy improves, said Mr Tim.

Thailand is expected to post a balanced or surplus current account this year if it has between 5-10 million foreign tourist arrivals, he said.

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