The global capital, digital asset and gold markets are likely to face intense volatility in the short term as investors anticipate the Federal Reserve will pursue hawkish monetary policies next year, aiming to curb the spiralling inflation rate that recently hit a 40-year high at 6.8%.
Investors expect the Fed will double the pace of its quantitative easing (QE) tapering from US$15 billion to $30 billion per month, as well as raise interest rates by mid-2022, earlier than the present schedule of 2023-2024, at its meeting on Wednesday.
Kobsak Pootrakool, senior executive and vice-president of Bangkok Bank, said the 40-year peak for US inflation should lead the Fed to ramp up its QE tapering and raise interest rates faster than expected.
The central bank’s tightening of its monetary policies will cause massive outflows from the global stock, bond, cryptocurrency and gold markets in the short term and propel investors to seek refuge in the US Dollar Index, he said.
Mr Kobsak said a high inflation rate is a huge risk to the economy because it can induce an economic bubble. Therefore, the Fed must employ contractionary monetary policies to control inflation, he said. However, such policies will cause volatility in fund flows around the globe.
Thai markets will be affected in the short term, but Mr Kobsak believes the country’s public and private sector financial positions are strong and will recover in a short period.
He predicts other emerging markets such as Turkey, Venezuela, South Africa or countries with weakening currencies could be heavily affected.
“Investors must invest cautiously during this period and closely follow the news regarding major central banks’ decisions on their monetary policies. They should also sell to take some profits until US inflation subsides,” said Mr Kobsak.
Finansia Syrus Securities said in addition to the Fed’s action on monetary policy, another factor to follow is the economic impact of the new Covid variant Omicron.
While Omicron is spreading throughout the world and poses a high global risk of an infection surge, the variant reportedly causes milder symptoms that can be prevented by existing vaccines.
Pfizer recently stated its Covid vaccine is 33% effective in preventing infections from Omicron, but 70% effective in preventing serious illnesses and hospitalisation.
For Thailand, the pandemic is an overhang factor affecting stocks helped by the country’s reopening in the short term. However, the Thai bourse still has opportunities to grow in the medium and long term from progress in the distribution of booster shots, said the brokerage.
- Watch Carrie Underwood Take Brad Paisley for a Wild Ride on His ABC Special
- Johannesburg Diaries: A wild ride
- Disturbing photos reveal how elephants are beaten with bull hooks and tortured for 'entertainment' in Thailand - as Australian tourists are urged to 'stop riding' the animals
- Eurozone crisis live: ECB action cheers markets - as it happened
- How Jeffrey Epstein Made His Money: Four Wild Theories
- Shocking footage of parkour group riding Paris metro a month before member Nye Newman killed in accident
- Yes to business, no to free rides: Amit Shah, Nirmala Sitharaman & Piyush Goyal at ET Awards 2019
- Spotlight: Global economy to slow, trade tensions to ease in 2020: bank report
- Pitch an idea, meet writers or sit down for a show of classical music
- Bundesliga Matchday 33 roundup
- Owsley Stanley: The King of LSD
- Scooters are a huge problem for cities. No one knows how to solve it yet
- 50 Movies We Can’t Wait to See in 2019
- Beaten with bull hooks and starved so they perform: Inside Thailand's heartbreaking elephant 'entertainment' industry - and how tourists can help new sanctuaries to stop their pain
- Stocks nosedive after Trump announces steel, aluminum tariffs
- Is Soros Seeking to Ruin Trump's Economic Rise Through Green New Deal?
- The Internet Apologizes …
- The inside story of Facebook’s biggest setback
Investors told to buckle up for wild ride on Fed actions have 619 words, post on www.bangkokpost.com at December 16, 2021. This is cached page on Auto News. If you want remove this page, please contact us.