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22 Oct 2015

International Economy

Fed to Wait for Clearer Signs before Rate Hike in October Meeting (Business Brief No.3580)

KResearch believes that the Federal Open Market Committee (FOMC) will probably ;maintain” its current key rate policy stance at the meeting during October 27-28, given that some economic indicators have shown signs of a possible slowdown, raising a red flag for the Fed to pay greater heed towards hiking its benchmark rate. Since no press conference is planned after the meeting, the Fed may not share any fresh perspectives on the US economy with the public this time around. This means that this meeting will not announce any significant message involving a rate increase. We deem that the US central bank will choose to keep an eye on developments a few months more before perhaps forming a suitable stance at its last 2015 meeting in December. Undoubtedly, they will keep watch on the usual gauges, e.g., the GDP (3Q15), job market and other defining clues, such as the outcomes of negotiations of the US debt ceiling expansion and budget talks, wherein a deadline is approaching in early November.

Thailand, however, will be somewhat relieved, although only temporarily, if the Fed delays a decision to increase its key rate, in similar sentiment to that experienced after the September meeting. In response to that delayed hike, many markets globally have made positive revisions to their forecasts. And as a result, we see capital flowing back into emerging economies again, but that also means smaller bond yields in those markets, including Thailand. Regional currencies as well as the Baht will likely appreciate, supporting the government's accommodative key rate policy, which should facilitate the work of stimuli packages announced last month by the Ministry of Finance to rejuvenate the economy.

International Economy