KUALA LUMPUR: The revisions to the United States Federal Reserve (Fed) fund’s projections suggest a higher probability of a rate hike closer towards March 2015.
Maybank FX Research, however, maintained its view that the Fed will raise rates in June next year with the Fed funds rate raising 100 basis points and to around 2.5 per cent by end of 2016.
The Federal Open Market Committee (FOMC), which met on Wednesday, had revised upwards their inflation and revised lower their unemployment projections for the US.
The announcement yesterday implies that it will end asset purchases in October.
“FOMC participants’ new projections and the median for the Fed funds rate at end-2015 increased to 1.35 per cent compared with 1.15 per cent in June is viewed as hawkish signal.”
The research house also revised its dollar outlook with the latest developments.
“We are adjusting our dollar versus Asian forecasts to mildly higher.”
This is given existing pre-emptive domestic policy rate hikes by some regional countries, supporting factors, such as capital inflows from still ongoing and expected monetary, credit and liquidity measures out of eurozone, Japan and China.
“Despite vulnerability indicators indicating weak fundamentals, mitigating factors have been building up since last year, which should be positive for Asian currencies.”
In its three-month outlook for the dollar, it expects the ringgit to trade at 3.26 versus the greenback.
The ringgit yesterday traded at 3.2370 at 9am, trading at a high of 3.2442 during the day.
It closed at a lower level of 3.2260/2290.