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18 Sep 2023

International Economy

Fed is expected to hold its policy rate steady at 5.25-5.50 percent at the FOMC meeting on September 19-20, 2023 (Business Brief No.4016 Full Ed.)

คะแนนเฉลี่ย

        At the Federal Open Market Committee (FOMC) meeting slated for September 19-20, 2023, the US Federal Reserve (Fed) is likely to keep its policy rate unchanged, pending assessment of the inflation outlook and the labor market going forward. Although headline inflation in the US has decelerated, it remains at a high level. Meanwhile, the robust labor market has shown signs of slowing down to a more typical level. Additionally, at the upcoming FOMC meeting, the Fed will also release economic projections and interest rate forecasts (Fed Dot Plot), which are key issues to monitor.

        Nonetheless, KResearch holds the view that the Fed may raise the policy rate one last time by the end of 2023, although the probability of that is relatively low. This is based on the conditions that future inflation declines gradually and remains above the target level, while the US labor market still does not slow down as anticipated. However, KResearch gives more weight to the scenario that the Fed may pause its policy rate hikes in this economic cycle and maintain the rate at 5.25-5.50 percent until at least the end of this year, amid slowing inflation and labor market. Looking ahead, the Fed may consider cutting the policy rate in the second half of 2024 if the US economy suffers a substantial slowdown. Even though the market sees a lower possibility that the US will slip into recession or greater probability that the US will be on course for a soft landing, US economic growth is expected to drop significantly next year, possibly below 1.0 percent. This could lead the Fed to adopt accommodative monetary policy to drive US economic expansion going forward.

        In short, the Fed’s policy rate path will mainly depend on economic and inflation data. Amid uncertainty surrounding US monetary policy, the Baht is likely to remain volatile going forward. If the Fed raises its policy rate more than expected, or keeps the rate unchanged longer than anticipated, the Baht could face pressure from a strengthening US Dollar.

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International Economy

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