Slowing US economic indicators prompt the Fed to hint at only one rate hike in 2019 (Business Brief No.3792)

         KResearch expects the US Federal Reserve (Fed) to keep the policy rates unchanged at 2.25-2.50 percent during the Federal Open Market Committee (FOMC) meeting on March 19-20, 2019. High external risk, slowing US economic activities and lower US inflation will prompt the Fed to hint at only one rate increase this year. It means that the Fed is likely to take a wait-and-see approach and keep the policy rates unchanged for a longer period until the economic outlook becomes clearer.  The Fed is also likely to reduce the balance sheet by USD50 billion per month for a while to maintain the policy space and prepare for possible cyclical economic downturn in the future, even though the US GDP growth this year has surpassed its long-term potential.

          ​Regarding the impact on the Thai economy, the Fed signal toward dovish monetary policy will not significantly lead to the US dollar depreciation because the market has somewhat absorbed the news. Looking ahead, the greenback will continue to be volatile due to the US political situations. Additionally, other events expected to happen concurrently around late March, namely, the trade summit between the US and China and the next round of Brexit negotiations will influence the movement of the US dollar which will result in the volatility of the Thai Baht and other regional currencies as well.