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18 Sep 2015

International Economy

Fed Keeps Key Policy Rate Unchanged (Economic Brief No.3574)

At the Federal Open Market Committee (FOMC) meeting on September 16-17, the Fed made a similar decision to that over the last 55 meetings and maintained their key policy rate unchanged at 0.00-0.25 percent. Their post-meeting statement, along with economic and inflation projections, as well as the Fed Funds rate outlook vis-à-vis their ‘dot plot' shown at the meeting indicate greater caution towards their rate hike stance. Since the global economy and financial markets have been volatile lately, US economic activity and inflation may be pressured as well.
Over the remainder of 2015, KResearch is of the view that the Fed may raise the rate perhaps once at one of the last two FOMC meetings in 2015. However, it is likely that economic risk factors (e.g., China's economy and the impact of that on emerging markets), as well as volatility in global financial and capital markets that may continue to the yearend may cause the Fed to refrain from the rate increase.

Although the Fed's latest decision has somewhat lessened pressure on global financial markets, the THB and Thai bond yield rates, we should recognize that such manifestations in the THB and domestic bond yields are only temporary. The THB will likely weaken again, just as medium- and long-term bond yield rates may rise, given the probability of a near-term Fed Funds rate hike and state initiatives here to mobilize funding for FY2016, being higher than that for FY2015.

International Economy