KResearch expects the US Federal Reserve (Fed) to maintain their policy rate at 1.25-1.50 percent during their first round of meeting of this year. They will likely be waiting to see developments in various factors, including the passage of US tax reform legislation and impacts of the weakening US Dollar before consideration of any changes in their monetary policy and any decision toward an appropriate timing for their next rate hike. At the same time, US economic momentum is going strong amid an uptick in US inflation. This will perhaps leave room for the Fed to raise their policy rate during the Federal Open Market Committee (FOMC)'s meeting in March, at the earliest.
Any further rate increases will likely depend on an anticipation of economic growth and the Fed signals toward their interest rate direction which will be revealed during the March meeting. That should provide a clearer perspective toward the US economic expansion in 2018. Nonetheless, the Fed is believed to stick to three rate increases in 2018 to avoid causing market volatility amid an improving outlook toward their economy and interest rates there.
Regarding any impact on Thailand, KResearch expects the Fed's decision to keep their rate unchanged this time should not lead to any change in Thailand's monetary policy implementation. Risks associated with the US political situation are the key factor impacting the Thai financial markets right now, and that is no doubt causing the depreciation of greenback currently. Nonetheless, if the Fed continues to send signals toward an upward adjustment in their interest rate, that might help ease pressure on the depreciating dollar. At the same time, the Thai government bond yield might gradually increase in line with a rise in US Treasury bond yields.