The FOMC decided to conclude its remaining asset purchase of US$15bn/mth under QE3. Meanwhile, the FOMC reiterated that current low Fed Fund Rate will be maintained for a considerable time.
Comparing the current FOMC statement with the one issued last month, we sense that the Fed has turned slightly hawkish and is unfazed by the recent volatility in the financial markets.
The FOMC brushed off market concerns about (i) disinflation risk due to lower energy prices and (ii) negative spillovers from weakness in other major economies (i.e. Euro area & China).
We expect the US economy to grow near its 3% par level in 2015, with a pick-up in consumer spending on the back of further labour market improvement and higher purchasing power (lower energy price & strong US$).
We expect the Fed to stick to its rate hike plan, with first rise in Jul-2015.
We expect US$ to maintain its strength into 2015, which will continue to pressure other major and EM currencies as well as global commodity pricing. In this regard, we expect MYR to remain weak, ranging RM3.25-3.30/US$ in 4Q14 and RM3.25-3.35/US$ in 2015. More moderate growth outlook, smaller current account surplus and a pause in the OPR will also curb upside of MYR.
