Asian Equities Lower Ahead of Central Banks

Asian stocks opened mostly lower Tuesday ahead of the release of central bank decisions in Australia and India.  The Reserve Bank of Australia (RBA) is expected to leave its cash rate steady at a record low of 2 percent, following two 25-basis-point rate cuts earlier this year. All 24 economists polled by Reuters expect the RBA to be on hold, but eight respondents say interest rates could be reduced to 1.75 percent or lower by December, if non-mining business investments remain subdued.

Meanwhile, India’s central bank will announce its policy decision later at 1330 SIN/HK and is expected to lower its main repo rate to 7.25 percent from 7.5 percent, according to a Reuters poll. Easing inflation will be the impetus for the Reserve Bank of India (RBI) to pull off its third rate cut of the year, experts say.

“Core inflation has moderated, suggesting that the momentum in the real economy is fading. The production impulse has been weak in recent months, while credit growth has failed to take off,” analysts from Moody’s Analytics wrote in a note. “With the economy operating under a negative output gap, and monetary policy is still relatively tight, we believe the RBI should ease pressure by cutting rates.”