Bank Indonesia tends to place a lot of weight on US Federal Reserve decisions because of its mandate to ensure currency stability. We think a cut by the Fed on Wednesday will give the green light for Indonesia to cut rates in October. But for other Asian central banks, domestic factors tend to matter more than the actions of the Fed. While we expect policymakers in Korea, Thailand and the Philippines to cut rates soon, this has more to do with the mounting worries about growth and fading concerns about inflation, than anything the Fed is doing.
Meanwhile, the central bank of Pakistan cut rates by 200bps at its meeting this week, but the tone of the statement suggests the pace of the easing cycle is now likely to slow. Finally, the Bank of Korea’s dovish minutes from its August meeting support our view that a rate cut there is imminent.
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