SCB EIC expects Fed to maintain interest rate and signal for maintaining interest rates for the whole year



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SCB EIC analyzed Fed In rate interest rate interest rate for the whole year In addition, Thai debt instruments are also seen. Especially Thai government bonds whose returns can be reduced

Federal Reserve – pictures from Shutterstock

Following the meeting of the Federal Reserve's Monetary Policy Committee or. T FOMC On March 19 and 20, 2019, the Fed's rate ranging from 2.25 to 2.50% was approved, and in addition, the Fed changed its attitude by raising interest rates to maintain interest rates throughout the year 2019 The Fed will still be likely to raise the political interest rate once in 2020. In addition, there is an announcement that it will be abolished at the end of September 2019.

Financial conditions are more relaxed.

SCB EIC It was found that adjusting the Fed's policy forecasts caused the financial situation in the US Generally Released US Government Government Bond Debt Long-term trends tend to increase more slowly than estimated. After the FOMC meeting, the yield of 10-year US government bonds fell by 10 basis points to 2.51%, the lowest since January 2018. In addition, key players in the Fed's political forecasts will be. It yields US government bonds Long-term adjusted less than expected

Given the expansion of the US economy The forecast of inflation is a key factor in the US long-term US government bond yields That's why the Fed has reduced economic forecasts and inflation. Together with the reduction of Dot Plot, which causes a break-even rate of inflation of US government bond yields, Trend does not increase much. In addition, the Fed announced that it will continue to balance the balance sheet in the next phase by purchasing US government bonds. This is a demand factor, which can not increase the premium premium (Term Premium). For the US dollar index, it was found that Somewhat weakened by 0.3%, while the US stock index remained stable

Reduce the pressure of central banks in the Emerging Markets group

Adjustment up Fed Fund Rate This is less likely to Reduce the pressure on emerging central banks As a result of the need for the EMBC to increase interest rates on the Fed, the risk that the EM economy will slow down will be diminished. Increasing investor confidence (Risk-On Sentiment) that can cause more capital to return to the EM and reduce the risk of money The topic will emigrate quickly (capital flight) down.

Impact on Thai government bonds

In addition, SCB EIC believes that the Fed's political forecasts have changed and the MPC's view that there is no concern about inflation will be accelerated in the future. The result is a decline in the yield of Thai government bonds. The yield of 10-year Thai government bonds fell by 9 basis points to 2.46% This is due to two factors, namely:

  1. The decline in the profitability of 10-year US government bonds, which is linked to the yield of Thai government bonds, is quite high.
  2. The view that inflation is not worrying is that, in the future, the MPC will accelerate unanimously after the meeting on March 20, 2019 to maintain the political interest rate and reduce economic forecasts.

To the effect of the Fed's monetary policy on raising political interest rates, the MPC EIC believes that the Thai economy is stable, that foreign countries are strong and that they implement monetary policy in the context of an adjustable inflation target. (Flexible Inflation Targeting) The monetary policy of the MPC is not influenced by the Fed.

Vir – SCB EIC

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mm

Columnist of Brand Inside, interested in capital markets both in Thailand and abroad. Infrastructure TMT (technology, media, telecommunications) Merger Including economic policies of foreign countries

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