Interest hike by Chinese central bank has little impact on baht: BoT

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BANGKOK, Dec 28 – The move by the People’s Bank of China to raise interest rates frequently will have little impact on capital movements affecting Thailand and the value of the baht, according to the Bank of Thailand (BoT).

BoT Assistant Governor Pongpen Ruengvirayudh said the Chinese central bank’s announcement of interest rate hikes on both lending and deposit by 25 basis points, which is the second time in two months, was aimed to rein in rising inflation.

“Now, Beijing is trying by all means to slow the inflation rate. It raised the interest rate once two months ago and issued a measure to maintain the liquid assets of commercial banks fortnightly before announcing the latest interest hike. It is expected the Chinese government will raise the interest rate further,” she said.

However, she believed that the interest hike by the Chinese central bank would not adversely affect the capital movement and currencies in Asia, including the Thai baht, because many countries, like China, looked to raise interest rates to contain rising inflation.

Thailand is considering the policy interest rate increase as part of its effort to control inflation, which is expected to rise at an accelerating rate next year.

At present, it is widely expected in the market that the BoT’s Monetary Policy Committee would further raise the policy interest rate next year.

The assistant governor said she believed all countries had already prepared measures to cope with capital inflows in a higher-than-usual amount. The measures are different, depending on the situation in each country.

Still, the BoT would closely supervise capital movements and the baht value and prepare tools to deal properly with the situation.

She emphasised that the interest rate is just one of the magnets attracting foreign capital. The major attraction for the capital influx is the economic growth potential of the country. (MCOT online news)