Morgan Stanley Fixed-Asia Economics The Viewpoint How Asian Central Banks Will ...-109818561
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Asia Economics | Asia Pacific
The Viewpoint: How Asian
Central Banks Will React
Domestic conditions will determine whether central banks will
cut, hike or stay on hold. But in determining the timing and the
pace of its next moves, Asian central banks will be considering
the trio of US growth, Fed policy path and the USD.
Chetan Ahya
!"#$%! &'()))*+,-'.)
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Derrick Y Kam
3##4 5"#$%! &6(6'*7,')-)
Jonathan Cheung
8 9$"#$%! &'())'7',(6()
Kelly Wang
5%%! :$"#$%! &'()*+6*,;'+.
For important disclosures, refer to the Disclosure Section,
located at the end of this report.
Key Takeaways
The key debate is still US recession risks. Our US economics team continues to
expect a soft landing with the Fed only cutting rates to 3.625% by end-2025.
For Asian central banks, the US growth debate matters in the form of Fed policy
and what it means for the outlook for the USD.
From both an interest rate differential and growth differential vs. rest of world
perspective, our strategists believe the dollar could remain supported.
The backdrop of less-favourable rate differentials and relatively weak Asian
currencies means that central banks will likely move only after the Fed.
Asia’s rate cut cycle will also be shallower as compared to the Fed, with the
weighted average rate in Asia ex Japan falling by 30bp vs. 175bp in the US.
August 12, 2024 08:36 PM GMT
M
2
Given recent events, it is not a surprise
that the US outlook continues to dominate investor conversations. As our global and US
economics team have detailed in a series of reports, the base-case view remains that the
US economy is on track for the soft landing that they have been predicting. See The
Weekly Worldview: Rising Central Bank Action (12 Aug 2024), Friday Finish – US
Economics: A slowing, not a slump: what we're watching (9 Aug 2024), US Economics:
Some weak July data but we still expect a soft landing (5 Aug 2024). In conversations, this
then shifts toward the outlook for the Fed policy path, what this means for Asia and how
central banks in Asia will react.
At the outset, inflation for large parts of Asia
have come within the central banks’ comfort zone and for some time now. While the
backdrop for inflation is benign, central banks across Asia are having to contend with an
external backdrop that has been less than conducive to reduce rates.
We would highlight the following:
1) Rate differentials – Policy rates are lower than the US
Policy rates in seven out of 10 Asian economies are lower than the US currently. Similarly,
real rates are also lower in many Asian economies as compared to the US, which makes it
tougher for the central banks in Asia to cut when the Fed has not yet embarked on rate
cuts.
Exhibit 1: $$#$<<8==%!#
#9>%?%@A=%!$=%!#>#%
#9>B#
-3
-2
-1
0
1
2
3
4
5
6
7
Dec-00
Dec-02
Dec-04
Dec-06
Dec-08
Dec-10
Dec-12
Dec-14
Dec-16
Dec-18
Dec-20
Dec-22
Dec-24
Nominal policy rate differential vs. US (%)
APXJ ex China
APXJ
MS f'cast
9#CD?#A#$%!E##
Exhibit 2: 2%!#>#%? @#$?>
F%%##
1.1 1.1 0.9
-1.0
-1.9 -2.4 -2.9 -3.4 -3.7
-5.1
2.9
1.9 1.6
0.0
-0.9 -0.6
-2.1 -1.9 -2.2
-3.1
-5.5
-4.5
-3.5
-2.5
-1.5
-0.5
0.5
1.5
2.5
3.5
India
Philippines
Indonesia
Australia
Korea
Malaysia
Thailand
Taiwan
China
Japan
Nominal rate differential with US (%)
Current Dec-25
9#CD?#A#$%!E##
M
Morgan Stanley Research 3
Exhibit 3: $$#$#%#>#%? @
G9$?%?%);;'
-4
-3
-2
-1
0
1
2
3
4
5
Dec-03
Dec-05
Dec-07
Dec-09
Dec-11
Dec-13
Dec-15
Dec-17
Dec-19
Dec-21
Dec-23
Dec-25
Asia ex China ex Japan real policy rate differential vs. US
(%, on 12M fwd inflation)
MS f'cast
9#CD?#A#$%!E##
Exhibit 4: E%#>#%F@#$?
#8=AHFA9#%>
-6
-4
-2
0
2
4
6
8Indonesia (%pp
2
4
6Philippines (%pp)
-4
-3
-2
-1
0
1
2
3
4
5
3
5
Asia ex Chin
(%)
0.4
-0.5
-1.0
-2.1 -2.1 -2.3 -2.4 -2.4
-3.8
-5.0
1.0
0.4 0.5
-1.0 -1.3
-0.4 -0.7 -1.1
-2.3
-2.8
-5.5
-4.5
-3.5
-2.5
-1.5
-0.5
0.5
1.5
Indonesia
Philippines
India
Korea
Thailand
Malaysia
China
Australia
Taiwan
Japan
Real rate differential with US (%, on 12M fwd inflation)
Current Dec-25
9#CD?#A#$%!E##
2) The USD to stay supported
The US dollar has been strong in the current cycle, having appreciated by 8% since 2021
and 5% since the Fed embarked on its rate hike cycle. Our FX strategy team also notes
that there are a number of USD-supportive developments such as growth, inflation
dynamics as well as the market pricing of shallower rate cuts elsewhere as compared to
the US. Central banks in Asia have been cautious, highlighting that the strong dollar (and
hence weak Asian currencies) could yet impose upside risks to the inflation outlook and
therefore holding them back from cutting rates. Moreover, in the run up to US elections in
November, our global FX strategy team has noted that policies proposed by the
Republican Presidential campaign would likely provide a boost to the USD (see Global
Macro Strategy: The White House and the Dollar, 6 August 2024).
Exhibit 5: 3%%##$F$>9##
!%
80
85
90
95
100
10585
90
95
100
105
110
115
120
Aug-19
Nov-19
Feb-20
May-20
Aug-20
Nov-20
Feb-21
May-21
Aug-21
Nov-21
Feb-22
May-22
Aug-22
Nov-22
Feb-23
May-23
Aug-23
Nov-23
Feb-24
May-24
Aug-24
DXY Index
Bloomberg Asia Dollar Index (RS)
USD strength
9#CI%G#$A#$%!E#
Exhibit 6: <%9>$JKE>2D2A#9##?
#%?%!$G>%%#
0.1
0.3
0.5
0.5
0.6
0.6
0.7
0.9
1.0
0.0 0.2 0.4 0.6 0.8 1.0
INR
PHP
CNH
IDR
MYR
TWD
SGD
KRW
THB
52-week rolling beta DXY USD
9#CI%G#$A#$%!E#
What this means for our forecasts
The upshot of this backdrop is that we continue to expect Asian
central banks to still follow the Fed. If the Fed does cut, as our US team expects, in
September, we would expect central banks in the region to be able to progressively cut
rates in line with our base-case forecasts (see the later sections for more details of this
forecast path).
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MAsiaEconomics|AsiaPacificTheViewpoint:HowAsianCentralBanksWillReactDomesticconditionswilldeterminewhethercentralbankswillcut,hikeorstayonhold.Butindeterminingthetimingandthepaceofitsnextmoves,AsiancentralbankswillbeconsideringthetrioofUSgrowth,FedpolicypathandtheUSD....
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作者：复利王子
分类：外资研报
价格：免费
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时间：2024-08-29
