Apisak lukewarm on rate hike

Apisak lukewarm on rate hike

Finance Minister Apisak Tantivorawong wants the Bank of Thailand to keep the policy rate on hold at 1.5% throughout the year. (Bangkok Post photo)
Finance Minister Apisak Tantivorawong wants the Bank of Thailand to keep the policy rate on hold at 1.5% throughout the year. (Bangkok Post photo)

A policy rate hike would not address low inflation and would in fact worsen the debt-servicing ability of small-business operators and strengthen the baht, says Finance Minister Apisak Tantivorawong.

It is the central bank's responsibility to adjust the one-day repurchase rate, he said, but a monetary policy shift would not affect subdued inflation.

Low inflation is a concern for next year, Mr Apisak said.

The debt payment ability of small and medium-sized enterprises (SMEs) would be affected and fund inflows would accelerate if the policy rate were raised, he said, adding that the central bank should consider the timing for policy changes and ensure that there are no problems for the economy.

His remarks followed a narrower split among Monetary Policy Committee (MPC) members, who on Wednesday voted 5-2 to maintain the benchmark rate at 1.5%, where it has remained since April 2015. The vote gave weight to the view that the first rate hike since August 2011 is around the corner.

The baht firmed immediately after the MPC meeting as investors speculated that the split vote suggested an imminent rate hike, Mr Apisak said.

Bank of Thailand governor Veerathai Santiprabhob last month voiced concerns about offshore funds flowing into Thailand at a faster pace relative to regional peers, pouring mostly into short-dated bonds and driving the baht higher.

The baht is one of the few currencies in Asia that have appreciated against the US dollar this year. Foreign investors view the baht as a safe haven, given Thailand's high foreign reserves, current account surplus and low foreign-denominated debt.

In related news, Mr Apisak insisted there is no merger plan for Krungthai Bank (KTB) and TMB Bank (TMB) as rumoured.

The Finance Ministry is ready to lower its shareholding in TMB if investors make an appropriate offer, he said, adding that in the event there is no suitable offer, the ministry will need to wait for a higher price.

The Finance Ministry holds a 25.9% stake in TMB, the country's seventh-largest lender by assets, with an average cost of 3.86 baht per share.

TMB shares on the Stock Exchange of Thailand were flat on Thursday at 2.38 baht in trade worth 849 million baht.

Mr Apisak said all Thai banks, including TMB, have a strong financial position.

Mergers are an issue that each bank needs to decide on its own, he said, while the Finance Ministry offers measures to facilitate mergers and acquisitions.

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