Analysts are expecting the US Federal Reserve to cut interest rates by 25 basis points (bps) at its Dec 18 meeting, prompting the Bank of Thailand to follow suit in 1-2 months.
The Federal Open Market Committee (FOMC) is most likely to cut interest rates to 4.25-4.50% on Dec 18, based on the tone of recent speeches from Fed governors.
Prediction site Kalshi currently rates the chance of a cut at 73%. There is more economic data on jobs and inflation to come before the FOMC meets, but with "subdued inflation and a somewhat softening jobs market, a reduction appears likely", it said.
The FOMC cut interest rates at its two previous meetings in September and November after holding rates at peak levels for more than a year. Policymakers have signalled that rates are likely to move lower over the next year, but the pace of the cuts will depend on incoming data.
New York Fed President John Williams threw his support behind further rate cuts in the future, saying a "balanced" approach to monetary policy remains appropriate to sustain economic growth, and reaffirmed that its decision-making approaches would be based on highly uncertain economic data.
Macro readings are quite strong, with October job openings at 7.74 million, beating estimates of 7.48 million. The Atlanta Fed's GDP tracker model predicts US GDP in the fourth quarter would grow by 3.2% quarter-on-quarter.
Most recently, Fed chair Jerome Powell's speech at the New York Times DealBook Summit last Wednesday touted a US economy in "remarkably good shape" as a reason he feels the Fed can "afford to be a little more cautious" in its strategy of cutting interest rates.
Traders predict a 77% chance of a 25bps cut, compared with 67% a week ago, per the CME FedWatch tool. There is concern that inflation potentially stuck above the FOMC's 2% annual target could delay the further loosening of monetary policy, though policymakers appear to be more inclined to look at the broader trend of disinflation rather than single data points, said analysts.
Asia Plus Securities expects the Bank of Thailand's policy rate meeting on Dec 18 to keep the rate at 2.25%. Thailand's economy is still expanding, supported by exports, tourism and consumption, helped by a 10,000-baht cash handout to 14.5 million vulnerable people. Thailand's inflation is nearing the central bank's target of 1-3%.