KResearch expects the US Federal Reserve to cut rates by a quarter of a percentage point from 2.00-2.25 percent to 1.75-2.00 percent during the Federal Market Open Committee (FOMC)'s meeting on September 17-18, 2019. The key US economic indicators, especially manufacturing output and employment, continue to show a downward trend. Moreover, uncertainties continue to weigh on the US economic outlook. These factors are likely to prompt the Fed to cut the interest rates. The Fed's officials are likely to hint that the extent of rate cuts will be appropriate for the economic situation to avoid speculation in the money market, which can reduce flexibility in the implementation of monetary policy in the future. For the US economic outlook, the Fed may slightly lower the growth forecasts for the US economy this year and next year. The signal reflects the recent intensifying risk factors against US economic expansion, which should not significantly impact the future monetary policy direction.
Regarding the impact on the Thai economy, additional monetary easing by the Fed and other major central banks amid the intensifying headwinds against global growth will make emerging markets with a strong external balance, high current account surplus and not directly involved in the trade dispute, such as Thailand, more appealing to capital inflow. In response to the Fed's and other major central banks' monetary easing, Thailand's Monetary Policy Committee is expected to consider both domestic and international factors rather than waiting for the cue from other major central banks alone. Hence, the Thai central bank is unlikely to follow the Fed's move immediately, but it is likely to monitor the development of other economic situations before making any decisions on policy rates.