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| Are Southeast Asia central banks ready to raise rates? |
| 06-MAR-2010 Intellasia | Reuters | The Edge |
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| 6 Mar, 2010 - 7:00:00 AM |
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Asian central banks may be among the first in the world to raise interest rates as regional economic growth rapidly outpaces that in the West and fuels inflationary pressures, according to Reuters.
Indeed, some analysts think Malaysia will raise rates later on Thursday.
Below is a list of the latest thinking on the timing of rate rises in Southeast Asia as central banks in Indonesia and Malaysia review policy.
MALAYSIA
The central bank is expected to keep its Overnight Policy Rate on hold at a record low of 2 percent on Thursday, though a significant minority of analysts say a 25 bps rise is possible. All analysts polled in a recent Reuters survey saw 50 to 75 bps of increases by the year end.
Though inflationary pressures appear subdued, speculation of an earlier-than-expected-rate move was boosted after fourth quarter economic growth was much stronger than expected. Markets also started to price in a hike since the central bank in January started talking about "normalising" rates. Thursday's rate decision is expected at around 1000 GMT. The central bank cut rates by a total of 150 bps during the crisis.
INDONESIA
The central bank is expected to keep its BI policy rate on hold at a record low 6.5 percent on Thursday and reiterate that price pressures remain manageable thanks to a strong rupiah , which is keeping imported inflation in check.
A recent Reuters poll showed analysts have pushed back the timing of an expected rate rise to the third quarter from the second quarter predicted a month ago. The central bank says it won't raise rates all this year if inflation remains within its target band of 4-6 percent, but economists expect a median increase of 50 basis points (bps) by end-2010.
Thursday's rate decision is expected at around 0500 GMT. The cental bank cut its policy rate by a total of 3 percentage points during the global economic crisis.
PHILIPPINES
The central bank is expected to keep its overnight borrowing rate steady at a record low 4.0 percent until the second quarter at the earliest, when some market watchers see a hike of 25 bps.
Markets expect inflation to remain manageable but pick up to a possible peak of around 5 percent in the third quarter, with 75 bps of rate increases seen by the end of the year. During the crisis, the central bank cut its key rate by 2 percentage points.
The Philippines started rolling back crisis-driven liquidity measures when the central bank raised the rate on a short-term lending facility in January in response to improving financial market conditions.
THAILAND
Thailand is expected to keep its key one-day repo rate steady at 1.25 percent until late in the second quarter as long as core inflation remains mild and as policymakers wait for signs of a stronger economic recovery.
Some market watchers see a rate rise at the central bank's June 2 meeting, with a median 50 bps in total increases seen by end of the year. Policymakers cut the key rate by a total of 2.5 percentage points during the global downturn.
NOTE: * Australia's central bank is the only major central bank in the Asia-Pacific region to have raised policy rates since the global crisis ebbed as its economy posted a surprisingly strong recovery, buoyed by China demand.
* Singapore's central bank calibrates its policy by guiding the exchange rate within an undisclosed band rather than officially setting interest rates. The current policy calls for a stable currency, after it eased policy last April through a mild devaluation to stimulate the flagging economy.
*Vietnam has raised rates but not as part of an unwinding policy. With its currency under pressure and facing growing expectations of a return of high inflation, Vietnam devalued the dong and raised its benchmark base rate to 8 percent from the start of December.
http://www.theedgemalaysia.com/index.php?option=com_content&task=view&id=160834&Itemid=79
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