Inflation risk rising

With the Thai economy running near full capacity, a sharp rise in wages and government spending may simply be inflated away, providing little benefit.

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BANK OF THAILAND: Inflation risk today higher than in past by Parista Yuthamanop

The government must be aware that inflationary pressure today is stronger than in 2001 when the first Thai Rak Thai government began the heavy spending that helped make it so popular with low-income voters, says Prasarn Trairatvorakul, the Bank of Thailand governor.

"There was room for economic stimulus in the period after 1997 up until 2000 and onward. But the economic situation currently is different. Inflation will show up as an impact of government spending, if it is geared toward spending on expanding capacity," he said in an address to Chulalongkorn University's Faculty of Commerce and Accountancy on Monday.

It is comparable to a crowded room. If more people are stimulated to come in, it will be congested inside. And people will feel uncomfortable.

The persistently high pressure on the cost of living remains a challenge in the near term, as economic growth is near capacity. Inflation induced by the thinning of what economists call the "output gap" could be remedied by investing in basic infrastructure to support future growth, he said.

"Oil and other commodity prices have eased, but they have remained volatile," Dr Prasarn said. "Inflationary pressure has remained high, deriving from demand, supply and expectations of minimum wage increases and increases in government spending.

He said economic momentum remains healthy in the second half, with consumer spending power aided by rapid bank lending, high farm incomes and low unemployment. Private investment is likely to increase soon, as many industries are using almost all their capacity.

A decline in the economic growth of the US, Europe and Japan could have a limited impact. Exporters' shares in the three markets has decreased significantly as more trade takes place within Asia. But uncertainty in the US and Europe has increased, Dr Prasarn said.

"The US has run out of ammunition in its monetary policy. And it has to cut the budget deficit by $2.4 trillion out of $9 trillion. That is significant," he said. "In the euro zone, we must monitor if the debt crisis spreads to core economies.

Dr Prasarn said the central bank's recent interest-rate increases had been aimed at preventing a general increase in prices, thus preserving consumer spending power. As well, higher interest rates improve the wealth of savers.
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"Even if the government increases wages, the value of money could decline if inflation rises," he said.

The central bank's Monetary Policy Committee is scheduled to meet today and it is widely expected to lift the policy interest rate by a quarter point to 3.5%.

Discussing the government's idea of tapping official reserves for other investments, Dr Prasarn said it needed to consider how to fund it.

"The government can't just take the assets, it needs to take liabilities too. It might need to issue bonds and raise funds to swap with the reserve money," he said.

(Source: Bangkok Post, BANK OF THAILAND, Inflation risk today higher than in past, 24/08/2011, Parista Yuthamanop, link) 

Inflation Vocabulary

inflation - the level of prices rising in the economy as a whole (See Wikipedia and The Economist glossary) ภาวะเงินเฟ้อ

inflationary pressure - changes in the economy that can make prices rice (example: wages rise for all workers without any increase in goods produced (productivity), then price level likely to rise)

cost of living - the cost of maintaining a certain standard of living, usually given by a cost of living index used to compare the cost of maintaining a certain standard of living in different geographic areas, "employment contracts, pension benefits, and government entitlements such as Social Security are often tied to a cost-of-living index, typically to the Consumer Price Index (CPI). A Cost of Living Allowance (COLA) adjusts salaries based on changes in a cost-of-living index. Salaries are typically adjusted annually. They may also be tied to a cost-of-living index that varies by geographic location if the employee moves." (See Wikipedia)

pressure on the cost of living - changes in the economy causing the "cost of living" to increase (for example, increases in the price of gasoline or rice)

persist (verb) - continuing without stopping for a long period of time
persistent (adjective)  
persistently (adverb)

persistently high pressure on the cost of living - changes in the economy over time that do not stop

consumer - someone who buys and uses goods and services ผู้บริโภค
consumer spending power - the ability of consumers to buy things with the money they earn (inflation reduces "consumer spending power")

economic stimulus - temporary increases in government spending during a recession or economic slowdown to get the economy moving and growing again

capacity - the highest amount of production possible if all factories and machines are used ความสามารถในการทำงาน; ความสามารถในการ (ผลิต)
economic growth is near capacity - the greatest amount that can be produced by the economy is near to being produced (all equipment and factories are being used to full capacity)
using almost all their capacity - using almost all the resources (factories, machines, etc) they have for producing more goods

output gap - the difference between potential GDP and actual GDP or actual output; "the amount by which a country's output, or GDP, falls short of what it could be given its available resources" (See Wikipedia on output gap and capacity utilization)
thinning of the output gap - the output gap grows small (meaning: very little unused or unutilized capacity)
gap - a space or opening in the middle of something or between things ช่องว่าง

remedied - corrected, problem solved
infrastructure - basic systems and services such as transportation, electricity, and water necessary for a country to run smoothly สาธารณูปโภค (See Google Definitions) (also ports, roads, subways, trains, waste removal, telecommunications network)
support - help สนับสนุน

investing in basic infrastructure to support future growth - investing in the basic systems and services needed for further growth in the economy (example: without decent roads, goods cannot be easily sent throughout the country)

wage - an amount of money that you earn for working, usually according to how many hours or days you work each week or month ค่าจ้าง
minimum wages - the smallest amount of money that a worker can receive each day for one day's work

trade - the buying and selling of goods การค้าขาย

economic momentum - the forward movement of the economy (that keeps it going even when there are economic forces (pressures, changes) that might lead to an economic slowdown)

prices eased - prices stopped rising at such a high rate (inflation rate fell)

volatile - changing quickly and unpredictably, moves by large amounts suddenly, the public does not know how to react and plan for the future ที่ปะทุได้ง่าย,  ที่เปลี่ยนแปลงได้ง่าย, เปลี่ยนแปลงอย่างทันทีทันใดและโดยคาดการณ์ไม่ได้, เปลี่ยนแปลงอย่างทันทีทันใดและโดยคาดการณ์ไม่ได้
prices remained volatile - prices continued to move up and down suddenly, in an unpredictable manner

rapid - happening quickly อย่างรวดเร็ว
lending - giving money to someone who agrees to pay it back in the future การให้ยืม
rapid bank lending - many bank loans are being made in short period of time

unemployment - the number of people without a job; people who are available for work and currently seeking work (workforce) but are without work  (See Wikipedia) การว่างงาน

investment - taking your money and putting it into projects to make a profit or earn interest (buying stock shares, bonds, real estate)
private investment - investment by companies (public = government)

ammunition - bullets, bombs, etc that can be fired from a weapon อาวุธยุทธภัณฑ์, ลูกกระสุน
policy - a plan of action to guide decisions and achieveoutcomes (See Wikipedia) นโยบาย

monetary policy - "the government or central bank process of managing money supply to achieve specific goals's”such as constraining inflation, maintaining an exchange rate, achieving full employment or economic growth. Monetary policy can involve changing certain interest rates, either directly or indirectly through open market operations, setting reserve requirements, or trading in foreign exchange markets" (See Wikipedia)
run out of ammunition in its monetary policy - the ways or methods to control the money supply and the supply of credit in the economy have all been used up

budget - an amount of money able to be spent on something งบประมาณ (See Wikipedia)
deficit - when you spend more than you receive (has to be financed or funded by borrowing)

debt - an amount of money that you owe หนี้
crisis - an urgent, difficult or dangerous situation วิกฤต วิกฤตการณ์

interest - the fee for the use of another's money for a period of time
interest-rate - annual interest as a percentage of the amount borrowed (principal)
policy interest rate - the interest rate that the central bank charges banks (used in monetary policy to control the supply of credit, money supply and inflation rate)
lift the policy interest rate - when increase the central bank increases the "policy interest" rate, to tighten the supply of credit and reduce inflation
lift the policy interest rate by a quarter point to 3.5%

wealth - how much money and assets a person or country owns
wages - the amount of money earned per hour by a worker (or perday)

foreign exchange - foreign currencies เงินตราต่างประเทศ
official - approved by the government or some authority ที่เป็นทางการ
reserves - here: foreign exchange reserves
foreign exchange reserves - the amount of foreign currency or gold held by a national bank, which is used for dealing with the national banks of other countries เงินสำรอง
tapping official reserves - using the foreign exchange reserves held by the central bank

funds (noun) - money to be used for a specific purpose เงินทุน
fund (verb) - to provide money for something ให้เงินทุน

assets - a thing of value with an owner ทรัพย์สิน , for example: stocks, bonds, real estate, loans to others, or money (See Economist glossary) ทรัพย์สิน
liabilities - money borrowed by a company,  the amount of money that a company owes (liabilities + owners' equity = assets) หนี้สิน, หนี้ขององค์กร

issue - offering securities (stock shares, bonds) for sale
bonds -

General Vocabulary

risk - the possibility that something dangerous or unpleasant might happen ความเสี่ยง
aware - knowing that something exists, or having knowledge or experience of a particular thing ทราบ

income - money that people receive from work or some other source, used for household consumption and savings
low-income voters - poor voters

impact - an effect or influence ผลกระทบ

X geared toward Y - X used to achieve goal Y, activity X directed at Y

address - a formal speech คำปราศรัย

challenge - something that needs a lot of skill, energy, and determination to deal with or achieve สิ่งที่ท้าทาย, การท้าทาย
remains a challenge
in the near term - over a relatively short time less than one year, in the short-term

demand - the need and desire to buy goods and services by households and businesses
expectations - what people think will happen in the future การคาดคะเน

aided - helped ช่วยเหลือ

significantly - in an important way อย่างสำคัญ
significant - large enough to be important or have an effect ที่สำคัญยิ่ง

monitor -watch and check a process over a period of time, to make sure that it is successful and there are no problems  ตรวจ, ติดตาม, เฝ้าสังเกต; ตรวจสอบ ตรวจตรา เฝ้าจับตาดู  เฝ้าดู จับตาดู

core - the most important or most basic part of something ส่วนสำคัญ
improve - to make better ทำให้ดีขึ้น

scheduled - planned to happen at a particular time or day ตามตารางเวลา
scheduled to meet today - when there is a plan to have a meeting today
expected - believe will happen คาดว่า (จะเกิดขึ้น)