Local economists say it is possible the Federal Reserve will hold interest rates steady for one year if US inflation and the labour market remain strong.
Kobsak Pootrakool, chairman of the Federation of Thai Capital Market Organizations (Fetco), said the US central bank is likely to either proceed with more rate hikes or keep the rate stable for this year.
"The current interest rate range of 5-5.25% has finally reached the same level as before the subprime lending crisis spanning 2005-09, signalling that hikes have neared a peak," said Mr Kobsak, also a senior executive vice-president at Bangkok Bank.
SCB Chief Investment Office (SCB CIO) expects the Fed to keep the rate unchanged for the rest of this year after a 0.25% increase earlier this month amid growing troubles in the financial sector.
"There is only a very slim chance for a rate cut this year as the Fed will keep trying to curb inflation, which is gradually slowing down, but not quickly enough to allow lower rates," said Kampon Adireksombat, head of SCB CIO.
He said financial institutions' lending conditions should become ไUS bank failures.
"According to the Federal Open Market Committee (FOMC), the US banking system remains strong and actually improved compared with early March," said Mr Kampon.
"Nonetheless, stricter credit conditions are expected to have an impact on economic activity, the employment rate and inflation, which will further escalate the risks of an economic recession."
SCB CIO, a unit of Siam Commercial Bank, expects regulations governing the banking industry, especially small and medium-sized banks, to be revised to be more stringent.
Mr Kobsak of Fetco agreed, noting that "these banks are like medium-sized ships. If they sink, this implies that the waves and sea storms are quite strong, meaning the same could happen to smaller ships.
"The global economy is entering the third phase where recession and crises emerge, as seen in the US banking sector. This trend is projected to persist for three to four quarters before the fourth phase of economic recovery starts by mid-2024."
According to the FOMC, the Fed remains committed to reducing inflation, which eased to 4.9% in April, down to a range around 2%, and that will take some time, he said.
"The adjustment of interest rate policy after this will factor in the cumulative results of the tight monetary policy following recent rate hikes, including the lags that will affect economic activities, inflation and changes in the financial market," said Mr Kampon.
