Some Asia-Pacific central banks have put rates on hold. Who could cut it first?

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Bank of Korea was the first to keep its rates steady after being the first to walk during the pandemic – and they could be the first to cut grades in the department.

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One by one, countries in the Asia-Pacific are stopping their tightening cycles this year after central banks around the world try to keep up with the aggressive rates of the US Federal Reserve in 2022.

While inflation in the region remains well above the central bank’s targets, the problem appears to be balancing economic growth and deflating currencies – thanks to the record high of the US dollar in September – discounts for now.

The dollar index somewhat weaker now on expectations that the Fed may end its tightening cycle soon. Inflation is also seen to be less sticky in the region compared to the US and Europe – BofA economists led by Helen Qiao said that inflation in emerging markets in Asia is as- has already “risen and begun to mediate in the region. “

In fact, economists say some central banks may already have reached the end of their tightening cycles and may begin to shift their focus to stimulating growth through rate cuts. Citi and ING are among those who expect to see such moves as soon as the second half of this year.

China and Japan remain more isolated in the current global tightening cycle. Here are the other central banks in the region that have hit the brakes for now – and what they might do next.

South Korea

  • Policy rate: 3.50%
  • Consumer Price Index: +4.2% year over year in March
  • Inflation target: 2%
  • GDP (Q4 2022): +1.3% year-on-year, -0.4% quarter-on-quarter
  • Next central bank decision: May 25

Bank of Korea was the first to hold rates steady after being one of the first countries to hike during the pandemic – and may even be the first to cut levels in the department.

Central bank governor Rhee Chang-yong pushed back on expectations of a rate cut later this year, as the Bank of Korea kept rates steady twice after seven hikes in 2022.

Economists at Citi and ING are among those taking that view with a grain of salt. They expect the BOK to cut rates as inflation returns to target and as the extent of the economic damage from its tightening cycle emerges.

Citi economist Choi Ji-uk said in a note on April 12, “The BoK is likely to start a rate cut cycle in August’23 to 2.00% by the end of 2024, assuming the level of the true neutral rate and the target of the inflation at 2%. “

Interest rate cuts in South Korea would be a 'premature' move for now, economist says

ING economist Min Joo Kang said, “We believe that demand-side pressures will turn soft as the restrictive policy environment weighs on consumption and the real economy, while at the same time it will not improve external demand conditions but gradually in the second half,” according to April. 11 notes.


  • Policy rate: 3.60%
  • Consumer Price Index: +7.8% year-on-year in Q4 2022
  • Inflation target: 2% to 3%
  • GDP (Q4 2022): +2.7% year-on-year, +0.5% quarter-on-quarter
  • Next central bank decision: May 2

The Reserve Bank of Australia defied market expectations for another hike in March when the central bank kept its cash rate target steady at 3.60% – marking the first pause since its tightening cycle began in May 2022. Its cash rate is at highest since May 2012.

The central bank, like South Korea, pushed back against completely closing the door on another rate hike. In fact, he clearly noted that further tightening is still needed.

“The Board expects that further tightening of monetary policy may be necessary to ensure that inflation returns to target,” the RBA said in a statement.

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“Our view is that the flow of data will continue to disappoint with deflation in the coming months and further rate hikes will not be justified,” economist Diana Mousina of AMP said in a note on April 4 , adding that she expects the RBA to start cutting. before the end of the year.


  • Policy rate: 6.5%
  • Consumer Price Index: +5.66% year after year in March
  • Inflation target: Around 4% (2% to 6%)
  • GDP (Q4 2022): It grew 4.4% year-on-year, it grew 3.5% quarter-on-quarter
  • Next central bank decision: Between June 6 to 8

The Reserve Bank of India kept its policy repo rate at 6.5% at its last central bank policy meeting in April, despite economists’ expectations that the central bank would hike 25 basis points.

Central Bank Governor Shaktikanta Das said he expects moderate inflation over the next 12 months, with the central bank lowering its inflation forecasts from 5.3% to 5.2% for the fiscal year. starting in April.

Central Asian banks don't have many more interest rate hikes to implement, economist says

Economists at JPMorgan and Societe Generale are among those who expect the RBI to cut rates by 25 basis points to 6.25% by the fourth quarter of 2023 and another cut to 6.00% by the first quarter of 2024, Refinitiv data showed.

Southeast Asia

Central banks in Indonesia and Malaysia have all kept their rate hikes on hold for now.

  1. Indonesia
    Bank Indonesia has again kept its 7-day reverse repo rate steady at 5.75% for the second consecutive move, saying the current rate is “sufficient to drive core inflation” to the range It has a target of between 2% and 4% by 2023.
    Citi economist Helmi Arman expects Indonesia to cut rates as soon as September this year.
    “As the inflation outlook is also unfavorable, we will see policy rate cuts happen more quickly,” Arman said in a note on April 12, adding that he moved up his forecast for cut in the first half of 2024 due to recent economic data.
    Indonesia’s consumer price index rose 4.97% in March. The central bank has raised rates six times since August 2022, and its next monetary policy decision is due on May 25.
  2. Singapore
    The Monetary Authority of Singapore kept its monetary policy unchanged on Friday, and warned of modest growth ahead of the year in its statement.
    The central bank said in its latest policy statement that it expects core inflation to average 3.5% to 4.5% for all of 2023.
    “Although inflation is still rising, the five monetary policy tightening moves made by MAS since October 2021 have reduced the trend of price increases. Singapore said.
    The central bank is expected to publish its next policy statement in October.
  3. Malaysia
    Bank Negara Malaysia kept its overnight policy rate steady at 2.75% in March, after the economy saw strong growth in 2022 and 8.7% growth last year, “led by the recovery in private sector spending and public after the full reopening of the economy.” The central bank has raised its rates four times since May 2022, according to Refinitiv.
    The consumer price index rose 3.7% year-on-year in February. Malaysia’s inflation target is between 3% and 4%, according to Refinitiv data. The central bank’s next monetary policy meeting will be on May 3.

There’s no stopping yet…

However, there are still central banks in the region that have continued to raise interest rates, including New Zealand and Thailand.

The Reserve Bank of New Zealand surprised markets earlier this month by hiking 50 basis points to 5.25%, exceeding expectations for a smaller hike. The country is still struggling with economic inflation of 7.2%. The next central bank meeting is scheduled for May 24.

The Bank of Thailand raised its policy rate by 25 basis points to 1.75% at its March meeting, and said it sees “a continuation of gradual policy normalization to be appropriate in light of the growth and inflation.” Thailand’s central bank meets again on May 31.

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