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 Now the question - a crucial one - is whether or not we are coming to the end of the easing cycle.

Although it is not yet unanimously agreed by market participants, the current markets, particularly interest swaps and futures markets, indicate there is a strong chance that the Fed may hold its policy rate at the next Federal Open Market Committee meeting in June. If that happens, it will be signalling the end of the easing cycle and it consequently implies an economic recovery in the United States in 2009.

The aggressive rate cuts, especially since the middle of 2007, have stemmed from the turmoil in the financial markets caused by the sub-prime mortgage crisis. The heavy losses incurred from the "structured" investment in financial products, which derived from the bundling of the mortgages, sent the financial markets into a liquidity crunch. The much lower Fed Fund rate, together with the massive injection of liquidity into the market led by the Fed and its various counterparts globally, has somewhat restored confidence up until now. Hence, the use of further rate cuts may not be productive and could only induce another threat to the economy - inflation.

Here I will attempt a few forecasts of what will happen until the end of the year.

1. The Fed will hold its policy rate, starting from the meeting next month.

2. The US economic recovery may start from the fourth quarter of the year.

3. Financial markets - foreign exchange, stocks and bonds - will from the third quarter proactively react to the decision to hold the rate, at least a full quarter ahead of the real recovery. Historically, the end of an easing cycle is followed by a bullish stock market. Simultaneously, an unwinding of long bond positions will be in the making, increasing the pressure for a higher interest-rate environment.

Last but not least, we will see a return to a strong dollar. Some may try to link this stronger dollar to the possibility of lower prices for commodities, especially crude oil and gold. I would rather suggest that the correlation between a stronger dollar and commodity prices may not be convincingly significant enough at the moment.

4. The Fed will refocus on inflationary pressure by the beginning of 2009 and will then start its tightening cycle.

5. On the local front, I also believe the Bank of Thailand will not lower its policy rate any further this year. If the Fed starts lifting its policy rate as I have forecast, and the central bank holds it rate, we may see the baht become weaker, possibly in the region of 33 to 35 to the dollar.

For those who need to hedge US-dollar liabilities, the current rate may be a good opportunity to lock in. Some may wish to hold out to pick up dollars at their cheapest, but they should not wait until after the end of June. I believe the US dollar/baht rate is bottoming out.