Thai PM calls urgent meeting of economic team after Fed tightening

THAILAND'S prime minister called an urgent meeting with his economic teams on Thursday (Jun 16) to discuss economic issues following the US Federal Reserve's (Fed) policy tightening, a government official said.

The meeting would concern measures to tackle rising energy prices and inflation, deputy government spokeswoman Rachada Dhnadirek told Reuters, without giving further details.

Thai headline inflation hit a nearly 14-year high of 7.1 per cent in May, while the baht currency is now at a 5-year low against the dollar.

Prime Minister Prayuth Chan-ocha will meet with teams that include his Deputy Prime Minister Supattanapong Punmeechaow, Finance minister Arkhom Termpittayapaisith, and representatives of the Bank of Thailand (BOT), according to local media.

Kobsidthi Silpachai, head of capital markets research of Kasikornbank, said the economic teams could negotiate a way for the BOT to avoid raising rates "if they can reduce the refinery margins to reduce the price of gas/diesel and inflation".

He expected a quarter-point rate hike at the BOT's next meeting on Aug 10 and another at its November meeting, when tourism recovers.

Poon Panichpibool, a markets strategist at Krung Thai Bank, said the main issue should be about energy and support measures as well as interest rates.

"If there are energy assistance measures, will a rate hike be necessary?," Poon said, noting it would be difficult to avoid a rate hike as the central bank has said rates must be hiked.

"The US and European economies will tumble late next year and we're unlikely to escape that, so we need to stock up more ammunition", Poon said, referring to policy room for future rate cuts.

He said he expects 2 quarter-point hikes later this year.

Central bank Governor Sethaput Suthiwartnarueput on Monday said delaying rate hikes for too long would not be good as inflation continues to climb.

Last week, the BOT kept its key rate steady at a record low 0.50 per cent but in a split 4-3 vote, with dissenters voting for a hike due to upside risks to growth and inflation.

On Tuesday, the central bank said it was ready to manage any excessive volatility in the baht.