Banks raise interest rates

As reported by thaivisa.com all banks have now raised interest rates on 12 month savings from 0.25% to 3.25%. Loan interests junp from 0.25 to 7.25 for MLR and 7.75% MOR and MRR. Good for deposits but bad for those paying ineteest on loans. Not a good sign for the long haul.

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Surely a rise of some 1000% suggest banking problems... Thailand is in trouble! Big trouble. Watch out for devaluation. Baht at 80 to the ┬г by 2007 - not the baht in your pocket, of course.

[ikarus]

re

[cottmann]

Thailand is in no trouble. Interest rates are going up in all countries of the region, including Korea and Japan (in near future). This is a natural way to fight inflation in the envoronment of growing economy.

As The Bank of Japan has decided to end its zero percent interest rate policy today (hooray - 1 yen per month per 1.5 million yen in a Citibank account is laughable!), a lot of the money that has moved out of Japan will come back if the interest rate rises significantly. This will make money more expensive elsewhere - including the US and the UK - and probably alter the value of the yen versus other currencies, and hopefully make my trips to LOS cheaper.

Are a pretty good indicator of the overall economy. As someone pointed out, interest rate hikes on the Prime Rate (what the gov't charges banks) rise to curb inflation and lower to fend off recession.

The "Fed" (Federal Reserve) is constantly monitoring the economy and will raise and lower the rate in small increments - usually a quarter point at a time. New loan offerings, ARMs (Adjustable Rate Mortgages), Bond and Savings interest will rise and fall as well.

With such an extreme change in the Thai rates, it appears to me that the interest rates haven't been keeping up with the economy, so an extreme adjustment was necessary.

As in all things, I could be blowing smoke out my ass as a result of my ignorance.

Are you sure there has been this extreme hike in interest rates or did someone type "from" when he should have typed "by"?

[TrongpaiExpat]

I don't think Thailand has a Federal Reserve Bank with an independent chairman. I think it's more controlled by a ministry under Thai Rak Thai.

Economist are split on how much effect rising and lowering prime rates has on either inflation or the strength of the currency.

The banks in Thailand were paying .08 just before the the 97 currency crash.

So, is Thailand in trouble, who knows?

The Bank of Thailand (BOT) set the prime rate ( UK call base rate). But I don't know whether the BOT must obtain an approval from the Finance Minister when they want to increase/cut the prime rate or not. Unlike in the west, most Thai banks do not always increase/cut their interest rates to comply with the BOT's prime rate's change. Often, the BOT have got very annoyed by them.

I wish the interest rate would go up high again. I used to enjoy 8% - 10% interest and now it's just about 2% - 3%.

Talking about trouble: surely UK pound is in big trouble due to the country's double deficit and visible slowdown in economy. Yes, UK pound can go up versus US dollar but the direction is clearly down versus Thai baht in near future.

But the UK can handle that sort of problem, with reserves.

[cottmann]

Talking about trouble: surely UK pound is in big trouble due to the country's double deficit and visible slowdown in economy. Yes, UK pound can go up versus US dollar but the direction is clearly down versus Thai baht in near future.

But the UK can handle that sort of problem, with reserves.

The IMF at http://www.imf.org/external/np/sta/ir/colist.htm has information on official foreign and other reserves by country. The Thai reserves are not insignificant, the UK reserves not as much as such a first-world country could expect, the US reserves positively piddling - presumably because they bank (no pun intended) on the US$ as the world default currency - and the Japanese way, way too much.