Looking Ahead in Asia

Asian markets seesawed last week amid speculation over the timing of a Federal Reserve interest rate hike and as central banks in South Korea and Thailand announced surprise interest rate cuts.  In the week ahead, markets may face more volatility with a string of central bank actions on tap.

The week also brings monetary policy decisions from the Bank of Japan (BOJ) and Bank Indonesia (BI) on Tuesday.  While the BOJ is set to maintain its pace of quantitative easing, its Indonesian counterpart will likely opt for its second consecutive cut, reducing its key interest rate by 25-basis-point to 7.25 percent.

Last month, BI surprised markets by cutting rates for the first time in three years, taking advantage of an oil-induced slowdown in inflation to ease monetary policy so as to spur economic growth.  “Inflation continues to weaken on account of cheaper oil, while Indonesia’s external position remains strong thanks to continued capital inflows. BI is unlikely to be too concerned about the rupiah’s recent depreciation as it will boost the struggling export sector,” analysts from Moody’s Analytics wrote in a note.


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