SINGAPORE, 11 March 2020 – Due to mounting global risks from the COVID-19 outbreak as well as the oil-price plunge, central bankers across the Asia Pacific must consider whether they can afford to wait until their next scheduled policy meetings or respond sooner.
Last week, the Federal Reserve (the Fed) has set an emergency 50 basis-point interest rate cut. Although none of Asia’s central banks immediately followed the Fed, some have added liquidity.
With policy meetings still some weeks away for India, South Korea, and Malaysia, analysts see those countries as being prime candidates to deliver off-schedule rate decisions. However, much will depend on whether global markets rally and credit conditions ease, which would take the pressure off central banks to move aggressively.
The Asia calendar looks quiet up until the Fed’s March 18 rate decision in Washington. Hours later, policymakers in Japan, Indonesia, and the Philippines are scheduled to announce their rate decisions, with Thailand and New Zealand following on March 25.
In China and Vietnam, a move can come at any time as their central banks do not follow a schedule of publicly announced meetings.
Thai central bankers signaled Monday they’ll wait to adjust policy until their regular meeting, as they examine developments in oil and global markets. The Bank of Thailand cut its benchmark interest rate to a record low Feb 5 amid worries about COVID-19, while also citing the need for liquidity injections and debt restructuring.
Banks that choose to wait may be pressured to move more aggressively. That may be the case for the Reserve Bank of New Zealand, which left rates unchanged last month, according to Eleanor Creagh, a strategist at Saxo Capital Markets in Sydney.
Others might find they can’t be so patient. Here are two of the few Asian central banks that could move in the coming weeks:
Not planned to meet until April 9, the Bank of Korea is a top candidate for an unscheduled move, said Tuuli McCully, head of Asia Pacific economics at Scotiabank in Singapore.
The bank convened an emergency meeting a day after the Fed’s surprise rate cut, but disappointed markets by falling short of pledging action. Expectations are growing that the bank will convene an off-cycle policy meeting this month to cut rates, as it did in the depths of the global financial crisis.
Bank Negara Malaysia has eased interest rates twice this year — a rare move globally, and one that goes against BNM’s own tendency to avoid back-to-back cuts. May 5 has been scheduled for its next gathering — the most distant among central banks in the region with scheduled decisions.
BNMN hasn’t had any unscheduled interest-rate moves since at least 2009, but in November unexpectedly announced a reduction in its reserve ratio.
The softening in oil prices gives the bank added impetus for an immediate policy reaction.
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