Inflation-DB.-Baht
The stone problem shakes the equation to solve ‘Era’
High inflation is a serious problem in all countries around the world. As a result of higher world oil prices After the protracted Russo-Ukrainian war spread to the shortage of raw materials for production Raw material prices and transportation costs doubled. aggravate the global economy Following the spread of COVID that are still haunted every day when the product is expensive causing a sharp rise in inflation Link to currency and interest rates
Nattaporn Treeratsirikul Deputy Managing Director Kasikorn Research Center commented that on July 13 last The US consumer price index (inflation) for June reached 9.1%, more than the 8% market forecast, raising concerns. because the opposite of the previous that the US had predicted that inflation would gradually slowed down in the second half of the year
When US inflation is high We have to keep an eye on how the US Federal Reserve (Fed) will take action since the Fed has maintained its stance and weight on inflation. and do whatever it takes to reduce inflation Therefore, there is a new view of the Fed that raising the policy rate by 0.75% may not be enough, it will increase to 1%, which will support the stronger US dollar. This is a downward pressure on other major currencies across the country.
While many countries mainly rely on the economic direction of the US market. because of the large economy And trade with the world. Therefore, if the domestic economy changes, it will affect the global economy. In the United States, high inflation is a result of the economy recovering from the coronavirus period. that the United States uses a policy of injecting money into the financial system (Quantitative Easing or QE) to the previous
It is also a popular consumer country. by importing more than exporting and mainly imported from China With China’s lockdown, the country has continued problems. supply chain disruption Impossible to transport by boat because there was no one to take things off the boat resulting in delayed delivery and more expensive The next period was the Russian-Ukrainian war. As a result, the price of energy continues to be high. Causing high US inflation therefore risking an economic recession
“Fed” choose to control inflation It’s better to trade a recession than let inflation get out of control. In the case of inflation as high as 9-10%, in the end, interest rates must be accelerated anyway. Because there is no tool to help control inflation.
However, interest rate hikes are not cyclical. According to the concept, interest rate increases will come with various effects such as people spending less. entrepreneurs invest less Because the cost of using money is more expensive, therefore, raising interest rates must be taken in conjunction with the consideration of the national economy.
effect of inflation if compared between countries in the same region Some countries may be less affected. Due to the low domestic economy, imports of goods have the ability to produce energy for domestic use In addition, the economic structure is still good. As a result, inflation in the country is not very high, such as Vietnam at 3.37%, Indonesia at 4.35%, Malaysia at 2.8%, Thailand at 7.6% from the cost of energy imports.
However, the Thai economy is still recovering. The situation is different from Myanmar, where there are political problems in the country. or Laos has financial liquidity problems affect more than Thailand
“Nattaphon” Looking at Thai inflation in an upward direction Even during this period, oil tends to drop below 100 USD per barrel. But there is still no high certainty. Because the Russo-Ukrainian war still exists. Including the amount of oil production from other sources did not increase much. The price of oil during this period has dropped because the market is worried. and is in the speculative period of the oil trading market But the one that really determines the price of oil is the demand and supply of the world market. There is still a lot of pressure on war. causing high oil prices Therefore, it is a factor that greatly affects inflation.
The Bank of Thailand (BOT) views that raising interest rates to curb inflation during the economic recovery period. It may not be good for the economy in high household debt. The problem of the Monetary Policy Committee (MPC) must be weighed carefully on two aspects of the interest rate hike period: 1. If inflation remains high and the baht continues to flow down by keeping interest rates low to support economic growth If assuming that this side helps support the economy is good. At the same time, on the other hand, there are cost problems, such as the heavy baht depreciation and inflation soaring. If raising interest rates can help reduce the damage that will happen to the economy in the future, it may be a better option. The MPC must weigh the risks that will have more impact.
At the same time, if the Fed raises interest rates, the interest rate gap between the US and Thailand will widen. In addition, the baht weakened. Moving at the level of 36.60-36.80 baht per US dollar. May weaken near the new resistance at 37 baht per USD. and there is a risk that the baht will weaken beyond the set limit
“Inflation is a problem that affects a wide range of people. But during this period, the price of the product began to decrease somewhat. may help with feelings and encourage people to continue their lives Help the feeling of some households who have a problem with not reaching the back. able to support expenses Even before facing high product problems. If the price can be reduced to help alleviate the burden of consumers, that’s a good thing. Including the falling oil price, it helps create a better atmosphere for tourism. and help encourage people to travel outside the home If oil prices continue to decline,” Nattaporn commented.
while Ronnarong Poonphiphat, Director of the Office of Trade Policy and Strategy (OCP) The Department of Commerce explained that the higher US inflation If the Fed raises interest rates so significantly that there is a large difference between the US and Thai interest rates. This will further affect the baht’s depreciation. and resulted in the cost of importing essential goods for consumption in Thailand especially energy and raw materials causing the cost of producing Thai products and increased retail prices This may affect Thai inflation. However, Thai inflation is still at a low level compared to other countries.
“If Thailand raises interest rates to curb inflation or make the baht not depreciate much It does not mean that it will result in lower product prices. This is because Thai inflation is caused by cost push, which means the supply is very tight, causing the product price to be expensive. Not caused by demand pull. Do not forget that the US interest rate hike. not the cause of global inflation. Only when interest rates are raised will affect the currency of other countries It only exacerbates inflation in the dimension of import costs.” The campaign concluded.
However, Thai people will have to face high inflation for a long time this year. Then how much should I expect to slow down next year? The average increase in inflation is 1-2%, that is, the average increase in products is 5-10 baht, creating a feeling that the price has risen a lot. Even the Ministry of Commerce asking the private sector to cooperate in fixing the price But in practice, no one would trade and take a loss. even without raising the price but lose weight or avoid changing the package and increase the price It’s hidden inflation!!
Therefore, “inflation-interest-baht value” is the economic equation that must be corrected to balance as much as possible.