KResearch holds the view that the FOMC will resolve during their meeting slated for October 31-November 1, 2017, to maintain their key policy rate at 1.00-1.25 percent, in a bid to resume a more normal pace in monetary policy, and to prevent financial markets from becoming too tight, which would disturb US economic stability amid their current low inflationary pressure.
Given the strong US economic recovery, another Fed Funds rate hike may be possible in December, as they have already signaled. However, financial markets may focus more on news toward the appointment of a new Fed Chairman, as well as on Congressional approval of draft tax reforms, because those factors are deemed important toward future monetary policies.
As for the impact of all this on Thailand, Fed signals toward more substantial monetary policy normalization have resulted in higher US bond yields and USD appreciation, which in turn has reduced pressure on THB appreciation, somewhat. However, since Thailand;rsquo;s economic growth has been only fractional, this may give cause to the Thai Monetary Policy Committee having to maintain their policy rate unchanged at 1.50 percent to support our own economic recovery. But, since Thailand;rsquo;s external position is stable, the risk of outward fund flows is quite limited.