International economics

[Gaybutton]

I admit I understand virtually none of this. Perhaps some of you can explain what this is all about and how, among other things, it may affect the baht exchange rates.
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Central banks expected to announce rate cuts by end of year

Finance Minister Pichai hoping Bank of Thailand will cut interest rates but economists feel this is unlikely

December 17, 2024

International news agencies are reporting that central banks around the world are concluding their final monetary policy meetings of 2024 this week, led by the US Federal Reserve (Fed) on December 17-18.

Most analysts predict a 0.25% rate cut, but the Fed may signal a slower pace of rate cuts in 2025 as US inflation remains above the Fed’s 2% target.

This comes amid persistent inflation and improved US economic indicators since September 2024. Another factor is Donald Trump’s victory, which brings policy risks, such as raising tariffs on Chinese and other imports. Economists view these measures as inflationary.

Last week, the European Central Bank (ECB) cut its interest rate by 0.25% as expected, marking the fourth reduction this year, totalling 1.0%. This brings the deposit rate to 3.00% and the lending rate to 3.40%, with signals of continued monetary easing into next year.

ECB President Christine Lagarde stated that the disinflation process is on the right track, with Eurozone inflation projected to reach 2.1% in 2025 and decline to 1.9% in 2026.

In addition to the ECB, several European central banks announced year-end rate cuts. The Swiss National Bank surprised markets with a 0.5% rate cut on December 12, while Denmark's central bank reduced rates by 0.25%. The Bank of England will conclude its meeting on December 19, with analysts expecting rates to remain unchanged at 4.75%.

Most analysts predict that the Bank of Japan (BOJ) will maintain its policy interest rate at its December 18-19 meeting, as it awaits clearer signals on domestic wage trends and spending, while closely monitoring potential policy shifts under a Trump-led US administration.

Survey results indicate that analysts expect the BOJ to hold its policy rate at 0.25%, with a rate hike likely postponed to January. The BOJ last raised interest rates in July and hinted at further hikes if wages and inflation align with projections.

In Thailand, Finance Minister Pichai Chunhavajira expressed hope that the Monetary Policy Committee (MPC) will lower the policy rate at its December 18 meeting, citing low inflation despite improved economic growth in the second half of 2024.

Pichai noted that the 2025 inflation target framework is nearing completion and will be submitted to the Cabinet in December. The Finance Ministry and Bank of Thailand (BOT) aim to coordinate monetary and fiscal policies, targeting a balanced inflation rate of around 2%.

Economists do not share his optimism, however. Amonthep Chawla, head of Research and Investment Advisory at CIMB Thai Bank (CIMBT), predicts that MPC will maintain the policy rate at 2.25% during its upcoming meeting. While he acknowledges the possibility of a rate cut due to slower economic growth and rising risks for 2025, he believes it will not happen this time.

Amorntep expects the MPC to reduce the policy rate in February and anticipates a total of three rate cuts throughout the year, bringing the rate to 1.50% by the third quarter to align with a slower economic growth outlook.

Phacharaphot Nuntramas, chief economist at Krungthai Bank (KTB), assesses the probability of a rate cut at this meeting to be less than 50%, as the Thai economy is expected to grow at 4% in Q4 of 2024 and continue at the same rate in Q1 of 2025.

He believes the economy is performing relatively well and does not foresee a rate cut in this meeting. However, he anticipates the MPC will reduce the rate to 2% next year, based on a projected GDP growth of 2.7-2.8%. If the economy grows below 2.5%, he expects a more significant rate cut.

https://www.nationthailand.com/blogs/bu ... e/40044213

[Jun]

I admit I understand virtually none of this. Perhaps some of you can explain what this is all about and how, among other things, it may affect the baht exchange rates.

1 They're mostly talking about the likelyhood of banks cutting interest rates. So there's nothing to understand.

2. If there were an unexpected cut in US interest rates and not in other countries, the dollar should, in theory weaken, as you get paid less for holding dollars.

3. If there were an expected cut in interest rate, the market should have mostly priced it in before the announcement.

I gather that both Thailand and the US are expected to cut interest rates over the next 12 months, so perhaps some balance. But such predictions don't have a great record for accuracy.

I'd rather not spend much time on exchange rates. Too difficult to get useful output.

I just try to invest money without too much exposure to any currency. Then deal with the results.

[Gaybutton]

I'd rather not spend much time on exchange rates. Too difficult.

Thank you. Then it seems to me, at least for exchange rates, it's all just as unpredictable as ever.

I don't understand why many "experts" stick their necks out with their predictions, almost none of which ever pan out, but that's what they do. Then, when it doesn't work out the way they predicted, now they come up with all kinds of explanations as to why it didn't happen as they predicted. So, I try not to pay any attention to it, although when they predict much better rates I admit it does give my wishful thinking a jump start.