By Greg Peel<\/p>\n
HSBC economists believe the ASEAN-4, Singapore, Malaysia, Thailand and The Philippines, will soon follow Indonesia’s lead and begin to cut interest rates.<\/p>\n
Headline inflation for the group bottomed in the third quarter of 2002 at 1.4% and has since risen to 5.5%. Energy accounts for 60% of that rise. However, the energy effect will soon appear to lessen, as comparative measures show less of a surge in prices than was the case last year. This will lead to a drift off in inflation numbers.<\/p>\n
The market is already expecting inflation to dip, and hence rates to fall. HSBC, however, has a slightly contrary view on both counts. Paradoxically, the economists believe inflation will not fall as much as expected but that rates will be cut more than expected.<\/p>\n
This view is derived from econometric modelling, which suggests that while Singapore’s inflation will fall noticeably it will be less of a case for the others, and for Indonesia.<\/p>\n
To explain their strange view, the economists offer their analysis of central bank “reaction functions”.<\/p>\n
They find that the ASEAN banks are heavily influenced by growth developments. Hence as inflation grew and economies grew faster, central banks tended to raise rates in a pre-emptive response. The same should thus apply as economic growth begins to slow, and inflation begins to teeter. Any sign of a slowdown, says HSBC, will be met with prompt rate reductions.<\/p>\n
Bank Indonesia was the most aggressive in raising rates, and has already begun to cut. HSBC expects the rate to fall from 11.75% to single digits next year.<\/p>\n
The Philippines will be next, with the Bank of Thailand following thereafter and Bank Negara (Malaysia) bringing up the rear.<\/p>\n
Singapore will not begin to cut in any meaningful way, says HSBC, until the Fed does.<\/p>\n","protected":false},"excerpt":{"rendered":"
A drift off in inflation will prompt a round of interest rate cuts from ASEAN nations, HSBC predicts.<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[58],"tags":[],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/52177"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=52177"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/52177\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=52177"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=52177"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=52177"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}