We at KResearch expect that the US Federal Open Market Committee (FOMC) may cut its policy rate by another 0.25 percent at its meeting scheduled for October 29-30, 2019. Although the Fed resolved to steadily trim its policy rates at the latest two meetings and announced the purchase of short-term treasury bonds in mid-November, the US economic performance overall and inflation expectations are continuing to fall and this may suggest that such actions may not be sufficient. Signs of a contraction seen in the consumption sector may inhibit the US economy to grow at less than that projected by the Fed.
Looking ahead, KResearch views that although the Fed will continue to send rather positive signals towards the US economy, development in the real sector over the next few months may provide a clearer indication of the Fed's monetary policy implementation, going forward. The first phase of the US-China trade deal may not be sufficient to significantly help ease downside risks to the US economy or support the US economy to bounce back, representing a challenge for the Fed's monetary policy implementation later on.
Meanwhile, if the Fed decides to shave its policy rate, the Baht (which is perceived as a safe haven among emerging economies) may strengthen to a certain extent because markets have already acknowledged the likelihood of the upcoming Fed Funds rate cut. A monetary policy stance of the Bank of Thailand's Monetary Policy Committee at its meeting slated for next week may primarily hinge on development in the domestic economy, which has significantly been affected by the anemic global economy and protracted trade war, as well.