Thread: Thai Baht at 5-Year Low

Thailand Inflation Spike May Tilt Odds in Favor of Early Rate Hikes

• End of diesel price freeze to feed through to retail inflation
• StanChart expects BOT to turn hawkish at its June 8 meeting

A market vendor waits for customers at a market in Bangkok on April 26.Photographer: Luke Duggleby/Bloomberg
By Suttinee Yuvejwattana (Bloomberg)

April 29, 2022

Thailand’s retail inflation is poised to accelerate from a 13-year high with the government lifting a freeze on some retail fuel prices, boosting the odds for the central bank to pivot away from its pandemic-era monetary policy accommodation.
Retail diesel prices will increase from May 1 after efforts to subsidize the fuel ended up with the government accumulating almost $2 billion in debt. Two years of unprecedented economic stimulus to blunt the impact of the pandemic has left the administration with little fiscal room to maneuver.

Authorities warned citizens about the effect of the price increase on overall living costs, with Prime Minister Prayuth Chan-Ocha this week appealing to the public for their cooperation as the government struggles to bear the cost of oil driven up by Russia’s war in Ukraine. With the baht slumping to a five-year low against the dollar, fuel will become more expensive for Thailand, a net oil importer, economists say.
The result: retail inflation that’s already at its highest level since 2008 is set to quicken further. That may force the central bank to review its “lower for longer” policy rate stance earlier than most economists expect.

Tim Leelahaphan, a Bangkok-based economist at Standard Chartered Plc, expects the Bank of Thailand to turn more hawkish or start signaling its policy shift to normalization in its June 8 meeting.

“There’s no sign of inflation slowing down anytime soon with the war, the baht weakness and the government’s reduction of oil subsidy,” Tim said. “Economic activities are also picking up as people learn to live with Covid. This should make the central bank more comfortable and start its policy shift to catch up with other countries.”

Although Governor Sethaput Suthiwartnarueput has so far maintained that the BOT will prioritize growth over supply-driven inflation, there is a growing chorus among monetary policy makers including in India that inflation is a threat to growth as rising costs may eat into disposable incomes and erode consumer confidence.

Economies such as India, Thailand and the Philippines are among those facing higher risks as high inflation “takes away the ability of the consumer to spend on other things,” Moody’s Analytics Inc. Chief Asia Economist Steve Cochrane said.

Thailand, for now, enjoys strong buffers including high forex reserves, low foreign debt and strong balance sheets, which have helped it shrug off higher interest rates in developed economies.

While a weaker baht may be helpful for Thai exports, it’s likely to fuel an exit of foreign funds from the nation’s bonds and stocks. The central bank on Tuesday vowed to step in to curb any “excessive volatility” in baht that’s stemming from faster rate hikes in the U.S.
Australia & New Zealand Banking Group says it will closely watch inflation and labor market dynamics for clues to any likely changes in BOT’s dovish policy.

“The odds of the BOT turning less dovish are rising,” Krystal Tan, an economist at ANZ, said. Clear signs of broadening demand-side price pressures and the labor market regaining a firmer footing would prompt us to reassess the timing of the BOT’s rate lift-off.

Originally Posted by tomcat

the government struggles to bear the cost of oil driven up by Russia’s war in Ukraine.

Caused by the 16%.

Originally Posted by tomcat

with the war

Caused by the 16%.

Originally Posted by misskit

the war in Ukraine

Caused by the 16%.

Oil and gas prices have increased due to the 16% scrambling around the globe looking for supplies to replace, their political decision to refuse to accept or reduce accepting any Russian supplied, oil and gas.

Looking for the 16% to assist the other 84% of the world's population is not envisaged, it's just business as usual for them. F**k the 84%

An extension of the Russian/China pipelines or the Myanmar/China pipeline connection might be something for the Thai government to suggest, ensuring the best global price and continuity of supply.

Russia has plenty, now that European countries are not wanting to buy so much.

Gas:

European nominations for Russian gas up to 98.96 mln cubic meters as of May 2

2 May, 15:39 Updated at: 15:49

"Gazprom continues supplying gas for transit to Europe as normal

MOSCOW, May 2. /TASS/. European consumers’ nominations for Russian gas move up to 98.96 mln cubic meters by May 2, Gazprom Spokesman Sergey Kupriyanov told reporters. Gazprom continues supplying gas for transit to Europe as normal.

"Gazprom is supplying Russian gas for transit through Ukrainian territory in a normal way in accordance with confirmed nominations of European consumers - 98.96 mln cubic meters as of April 2," he said.

Nominations stood at 97.2 mln cubic meters last Sunday. European requests reached the highest level of 109.6 mln cubic meters in early March."

https://tass.com/economy/1446241


Oil:

Pprobably more to sell, if the Thai government want's to assist it's citizens.