BOT awaits Fed statement on QE
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Up to three possible scenarios; central bank expects limited impact on capital flows
Like other central banks worldwide, the Bank of Thailand is bracing itself for the outcome of today’s meeting of the US Federal Open Market Committee. The Federal Reserve is expected to make a statement tomorrow.
BOT Deputy Governor Pongpen Ruengvirayudh said the movement of foreign capital would likely depend on the Fed statement. If it confirms that the United States’ monetary stimulus will be tapered off, there could be some short-term impact on markets, but foreign capital may not move in or out of Thailand too sharply.
“Now, everyone is waiting for the Fed’s statement on September 19. No one can guess what it will be,” she said.
Two or three scenarios are possible, ranging from no change to the current quantitative-easing programme to some reduction in monthly bond purchases, but a complete cancellation of QE is not expected.
The FOMC will probably cut monthly purchases of Treasuries to US$35 billion (Bt1.1 trillion) from $45 billion and keep mortgage-bond buying at $40 billion, according to a Bloomberg News survey of economists this month.
“The market consensus is that the Fed will decide to trim its quantitative easing, but investors don’t want to shift their positions one way or the other before the key event,” Bloomberg quoted Takahiro Nakano, a Tokyo-based senior strategist at Mizuho Trust & Banking Co, as saying.
The baht yesterday dropped 0.3 per cent to 31.783 versus the US dollar, sliding for the second time in eight days, according to Bloomberg.
Pongpen said the BOT’s Monetary Policy Committee had not yet discussed the possibility of holding a special meeting after the Fed’s statement.
BOT senior director Mathee Supapongse expects money markets to have factored in the likely tapering following this week’s FOMC meeting.
“We have to follow the Fed’s statement and its impact on money markets,” he said, expecting the Fed’s statement to be made with caution.
Mathee said the BOT expected the Thai economy to perform more slowly in the latter half of the year than previously hoped.
The central bank will announce its latest economic estimates on October 16.
