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15 Jun 2015

International Economy

Fed Meeting, Jun 2015: Policy Rate Unchanged, More Economic Assessment Needed (Economic Brief No.3562)

KResearch has evaluated that the upcoming meeting of the Federal Open Market Committee (FOMC), June 16-17, will not likely signal any benchmark rate hike amid a still-fragile economic recovery in the US and low inflationary pressure. With this in mind, we are inclined to believe that the Fed will not be making any shift in its existing key policy rate and will likely maintain its stance that any Fed rate hike will be conditional largely upon US economic data to come. An unchanged policy rate, if so, would be what markets expect, according to Fed Fund Futures data at the Chicago Mercantile Exchange (CME), which hasn't suggested any prospect of the Fed raising the rate during its June meeting.
Key issues warranting a close watch from this meeting include the release of the committee's latest US economic forecast that might be seen as indicative of the timing of any future policy rate hike. KResearch holds the view that the Fed will perhaps come to a decision to increase a benchmark rate for the first time in over 10 years at its September 2015 meeting.

As for any impact on Thailand, the Fed's signal to raise its key policy rate in the coming months could affect Thailand with a higher cost of funding. We may find it more difficult to relax monetary policy further amid rising volatility in capital and foreign exchange markets, and outflows from Thailand may occur. Thus, it would be wise for relevant sectors to devise plans to deal with such risks.

International Economy