The Stock Exchange of Thailand (SET) joined a rally of Asian bourses yesterday after the US Federal Reserve lifted interest rates to a 22-year high and downplayed the prospects of an American recession this year.
Hong Kong's technology-heavy Hang Seng index led regional gains on Thursday after the Fed's Monetary Policy Committee raised the funds rate by 0.25% to 5.25-5.50% at its meeting on July 26 and left the door open for a further hike in September.
Fed chair Jerome Powell said the economy still needed to slow and the labour market to weaken for inflation to "credibly" return to the central bank's 2% target. He expressed hopes that the Fed could meet its target of a gradual slowing of the US economy, or a soft landing, in which inflation falls and unemployment remains relatively low.
Mr Powell also noted that the bank no longer expects a US recession, noting that a noticeable slowdown in growth starting later this year is in the forecast, but "they are no longer forecasting a recession."
Kobsak Pootrakool, chairman of the Federation of Thai Capital Market Organizations, said the Fed has communicated to the market that getting inflation back to 2% is a top priority. Moreover, if the US economic recovery is better than expected, the US stock market improves and the banking crisis is resolved, the Fed will have to raise interest rates.
The Fed's interest hike appears to be nearing the end of the cycle, and when it reaches the peak it must be maintained at a high level for a long enough period. It is expected that the Fed will take about a year after this, if inflation gradually decreases, to cut rates.
Kasikorn Securities said the Fed might raise the rate again in September or November but it is nearly at the peak of this cycle. That makes the US dollar depreciate and emerging markets including Thailand become more attractive for investment.
Asia Plus Securities expects interest rates to be kept unchanged for the remaining five months of 2023 as recession fears subside.
"As inflation slows down, US real interest rates are now in a positive territory, signalling that the rate hikes will end soon," the brokerage said in a research note yesterday.
Fed Watch Tool suggests the hike in July should be the last hike of 2023 and expects the Fed to cut interest rates by 0.25% to 5.25% in September, it added.
The SET closed yesterday at 1,543.27 points, up 1.23%, in trade worth 62.6 billion baht.