Thai Macroeconomy: Currency, Rates & Household Debt
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Summary
The United States made a historic rate cut while Japan made a historic rate rise at almost the same time.
Those two decisions move global capital flows, and that is the condition Thailand’s central bank has to work within.
The question is whether Thailand should raise or cut, caught between two forces pulling opposite ways.
Key points
A small central bank does not choose freely
The rate differential with the US drives capital flows regardless of what anyone prefers.
Japan raising rates is a very rare event
After decades near zero, any move affects carry trades worldwide.
Opposite directions produce volatility
When two centres move apart, the currency in the middle swings hardest.
Domestic goals and external pressure can conflict
What the domestic economy needs may be the opposite of what the currency needs.