Thailand’s economy will be endangered if the US Federal Reserve raises interest rates by 75 basis points this week, according to Business Times on Wednesday, given that the country’s central bank has still held rates at a record low.
If the Federal Reserve raises interest rates by 75 basis points this week, it will put pressure on Asian central banks to do the same, or face greater outflows of funds and weaker currencies.
As can be seen from a comparison of Asian policy rates to their five-year averages, as well as from a study of interest rates adjusted for inflation and yield spreads against US Treasuries, the region is highly vulnerable.
Thailand, where the central bank has maintained a record-low interest rate of 0.50 percent, is one of the markets with the highest level of risk, said the report on Wednesday. Meanwhile, South Korea and New Zealand are in a better position as they were among the first to moved early to front load hikes, but still not immune to problems.
Unscheduled meetings of the Monetary Authority of Singapore and Bangko Sentral ng Pilipinas have shown that Asia’s central banks are prone to making hasty adjustments when inflation bites harder than planned.