KResearch expects the Federal Reserve to keep the policy rate unchanged at 2.25-2.50 percent during its first policymaking meeting of the year from January 29-30, 2019. Although the US economy has shown signs of solid growth, risks associated with global economic uncertainty may prompt the US central bank to tighten its monetary policy. At the same time, low oil prices and inflation may enable the Fed to wait and apply a data-dependent approach to its decision making. Additionally, the current interest rates are now moving toward the lower end of the long-term Fed target rates between 2.5-3.5 percent. Therefore, the Fed may not find it necessary to hasten the policy rate hike during this time of the year.
Regarding the impact on the Thai economy, the Fed signals toward a cautionary approach and a pause of policy rate increase may weaken the US dollar and, in turn, strengthen the Thai Baht. This is the factor that the Bank of Thailand will have to closely monitor. For the outlook of Thai monetary policy, the likelihood of the Fed keeping the rate untouched for a while may enable the Bank of Thailand to have some time to incorporate the latest developments of the Thai economy in its decisions on the policy rate hike to ensure that the policy rate movement will be appropriate for the country's development and changes in the global economic scene in the future.