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BOT plays down impact from ECB's rate cut

The Bank of Thailand (BOT) has said the European Central Bank's (ECB) policy to lower interest rates and increase cash flow will have only a minimal impact on emerging markets - including Thailand.

Roong Mallikamas, spokeswoman of the BOT, said the central bank did not anticipate the move would impact on markets in the same way the United States Federal Reserve's quantitative easing (QE) policy did because of the lower attraction for emerging markets while financial markets were expecting it.

Roong said even though there was going be an outflow of cash from Europe as investors sought a better return from other countries, the attractiveness of emerging markets had diminished and therefore it was less likely investors would rush to emerging markets.

She said developed markets were experiencing an economic crisis when the US was actively conducting QE, which drove investors to ventures in emerging markets because they did not have a better choice.

However, since economies in the developed markets were now recovering, especially the US, it was less likely that a large portion of funds from Europe would come to emerging markets this time.

Roong said another reason why the ECB's policy would have minimal impact on emerging markets was because financial markets had widely expected this move and so far the BOT had not seen worrying market reactions.

"The financial markets were expecting this ECB policy and previously there was no significant movement of funds within the market, and there was no violent movement in the regional or the global markets once the policy was announced while the Thai baht has moved in a cluster along with other currencies in the region on Friday," she said.


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