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9 Aug 2010

International Economy

FOMC Meeting, August 10: Fed Likely to Keep Rate Unchanged Amid Moderate Economic Growth (Business Brief No.2901)

KASIKORN RESEARCH CENTER (KResearch) estimates that the Federal Open Market Committee (FOMC) will likely decide to hold their Fed Funds rate at 0.00-0.25 percent during this year's fifth meeting slated for August 10, 2010, in order to maintain the momentum of US economic growth. Meanwhile, pressure on prices and inflation that is expected to be quite low will allow the Fed to continue their easing policy for a while. A factor that should be monitored would be their post-meeting statement that should indicate the Fed's point of view and reaction toward US economic figures and policy implementation in the future. Also, the statement may highlight a possibility for the Fed to implement additional easing measures via financial tools to enhance liquidity in some sectors that are unable to find funding, particularly small businesses.

However, a resolution to hold the US key policy rate unchanged is expected by the market, so Thai policy implementation and the movements of money and capital markets at home and internationally may be only slightly affected. KResearch is of opinion that there is room to allow normalizing our monetary policy stance over the remainder of the year, particularly if Thai key economic indicators show continuous improvement and political risks do not increase significantly. The above action by Thai authorities may help relieve the pressure on Core Inflation during the end of this year to the beginning of 2011. As a result, KASIKORNBANKGROUP estimates that Thai key policy rate will likely increase to 2.00 percent by the end of 2010.

International Economy