BOT to revise its economic assumptions : Atchana

Though she declined to say how the deep cut of the US Fed Fund rate would affect the central bank's policy rate movement.

She said with a wide expectation of world recession, oil prices are expected to fall. Thus, the risk for growth is rising, while the risk for inflation is lower.

"The Fed's movement of deep rate cut is a pre-emptive measure. It was quick and reasonable reaction. Though this can be interpreted in two ways. Some might think that this is positive to the market, while some might think that the deep cut means severe situation," Atchana said.

She warned that the new government must focus its economic policy to boost up domestic demand to compensate expected lower exports due to expected world economic slowdown.

 Analysts and banker believes the surprise cut of Fed Fund rate by 75 basis points to 3.5 per cent last night was only an initial short-term measure. More measures and more cuts are expected from the US central bank, they said.

Sukit Udomsirikul, analyst from Siam City Securities, said on Wednesday in a seminar of sub-prime crisis impact on Thai equity market that the US government is expected to introduce more stimulus measure as the sub-prime crisis is has already spilled over financial sector.

However, despite the deep rate cut, he doesn't expect any capital inflow to Thai market over the first six months of this year.

Sombat Narawutthichai, the secretary general of Securities Analysts Assocition, said the sub-prime crisis in the US is a complicate problem and the US Federal Reserve is expected to cut rate further by 50-100 basis points this year.

"The Fed Fund rate used to fall to 1 per cent, so it wouldn't be surprised if the US policy rate falls to 2.5 per cent this year," Sombat said.

Thiti Tantipuranant, Kasikornbank's head of capital market, believes that the baht is expected to appreciate further to Bt31.5-Bt32 per dollar within this year. - The Nation

Anoma Srisukkasem

Siriporn Chanjindamanee

Somruedi Banchongduang