13-14 June Fed Meeting 2nd rate hike likely, but a more cautious move (Business Brief No.3684)

KResearch expects a “rate increase” resolution to be approved at the FOMC's fourth meeting of 2017, slated for June 13-14. Such increase might be perhaps 0.25 percent, thus lifting their current rate range of 0.75-1.00 percent to 1.00-1.25 percent, on positive US economic developments, especially their job market. The Fed's policy normalization has been gradually implemented, but more challenges will probably occur during 2H17, amid heightened risks domestically and internationally.

Over the remainder of the year, there will likely be more uncertainty toward the Fed's moves to raise their policy rate, with all eyes trained on their viewpoints toward inflation. Lower inflationary pressure would allow the Fed to take longer timeouts between rate hikes. As for the US economy overall, domestic politics there under President Trump's leadership may pose a risk to new stimulus measures.

Looking ahead further, KResearch views that the Fed may envision a third rate hike this year, albeit amid increasing risks on both domestic and international fronts. Thisscenario isn't likely to be much of a surprise for markets, or cause much volatility in capital movements, because such a signal has been priced in since early this year. However, if the Fed decides to resort to a more cautious financial policy stance in the future, it would affect cashflows into emerging markets, including Thailand. Thus, the currencies of those countries would tend to appreciate.