Fed downsizes QE, Thai baht weakens


The US Federal Reserve has decided to cut its quantitative easing (QE) volume by US$10 billion, effective in April – a move that consequently weakens the baht, a senior central bank official said today.

Roong Mallikamas, Bank of Thailand spokesperson, said the Fed’s QE reduction to US$55 billion a month was predictable and it will pose only a slight impact on the global money market.

The US dollar has significantly strengthened against other currencies while the baht weakened to Bt32.33-32.35 against the dollar – a decline in line with other currencies in the region.

The Fed’s statement has signaled a policy interest rate adjustment after the QE termination, and interest rates will possibly be higher in the second quarter of next year.

Dr Roong said that the global interest rates are on a rising trend, contributing to funds flowing back to the US dollar in the short term.

She said the Fed’s decision to downsize QE indicated a strengthening US economy – a positive sign for the global and Thai economies.

Thailand’s economic growth has plunged to less than 3 percent which is far below the potential growth of 4-5 percent, mainly due to disappointing consumption and investment given the months-long political turmoil.

She said the investment sector will have to introduce new manufacturing technology to keep pace with advanced global technology, or it would lose its opportunity.

The central bank needs to continue a relaxed money policy to stimulate the economy, she said.