KResearch assesses that the Federal Reserve (Fed) will likely keep its policy rate steady at 0.00-0.25% and will not announce additional monetary easing tools during the Federal Open Markets Committee (FOMC) meeting slated for December 15-16, 2020, as the US economy still shows signs of recovery. However, some economic indicators have slowed down slightly compared with the months after the easing of measures to control the spread of the coronavirus (COVID-19).
Issues to be monitored in this round of meetings will be details regarding guidelines for the asset-purchasing program and US economic projections. The Fed is expected to slightly increase its economic forecast for 2022-2023.
Regarding the outlook for 2021, KResearch views that the Fed will remain cautious in assessing the economic outlook, as the rising cases of COVID-19 in the US will become a major obstacle to economic activity recovery in the coming months. Therefore, the Fed may signal for further monetary easing within the first quarter of 2021, which will weaken the US dollar. At the same time, Thailand’s fundamental factors, especially the current account surplus and the possibility of capital flows into Asian and Thai financial markets, will also pressure the Baht to appreciate further in the future. KResearch predicts that the Baht may gradually appreciate to the level of THB29.00-29.25 per US dollar by the end of 2021.
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