Aurelia Butler

BENGALURU (Reuters) – Bank Negara Malaysia (BNM) will hold its key policy rate at 3.00% on Thursday, adopting the same no-change stance as most of its Asian peers amidst signs of moderating economic growth and cooling inflation, a Reuters poll of economists showed.Inflation in the Southeast Asian nation dropped to a two-year low of 2.0% in July and the central bank, which does not particularly target inflation in setting monetary policy, said it would cool further.That suggests BNM, having raised rates by a modest 125 basis points in the current cycle, has concluded its tightening but will keep rates higher for longer as the weak ringgit, down over 5% this year, may prevent inflation from falling quickly.All 27 economists in the Aug. 29-Sept. 4 Reuters poll forecast the central bank would keep its benchmark overnight policy rate unchanged at 3.00% at its Sept. 7 meeting while medians showed it there through 2024.”BNM has limited reasons to change its policy stance for its upcoming meeting … inflationary pressures are easing, keeping the hawkish bias in check. BNM’s focus will remain on financial stability and external risks,” said Lavanya Venkateswaran, senior ASEAN economist at OCBC Bank.”BNM’s ‘slightly accommodative’ policy stance remains supportive of slowing growth hence there is no imminent need to ease policy. Moreover, BNM’s rate hiking cycle was less aggressive than regional peers implying that the room to par back rate hikes is lower.”A strong majority, 24 of 25, forecast the central bank to hold rates at 3.00% until the end of this year. Only one expected a 25 basis point hike to 3.25% in November.Some economists cautioned inflation could rise again once pandemic-era subsidies were lifted, suggesting the fight against price rises is not yet over. However, slowing domestic economic growth, coupled with a sluggish global economy and a weaker China – Malaysia’s largest trade partner – would compel the central bank to remain on hold for an extended period.Among those who had a view on rates until the end of 2024, over 80% of economists, 15 of 18, forecast the central bank would hold rates. Of the remaining three, one said rates would peak at 3.25%, while two expected them to fall to 2.75%.That was despite its regional peers, who have also completed their monetary policy tightening cycles, being forecast to start easing in the first half of next year. [RBI/INT][ID/INT][PH/INT][NZ/INT]”Leading indicators still point towards subdued third quarter growth … the MPC will likely keep policy slightly accommodative with the rate maintained at 3%. Our base case remains for an extended pause through 2024,” said Kit Wei Zheng, director, head of ASEAN Economics at Citigroup (NYSE:C).”The MPC may choose to wait until there is greater clarity over the timing and magnitude of subsidy reform before deciding whether or not to hike.” More

The Bank of Korea (BOK) last month held interest rates steady for a fifth straight meeting, as it continued to prioritise price stabilisation amid heightened growth risks. On a monthly basis, the consumer price index (CPI) rose 1.0% in August, after gaining 0.1% in the prior month, official data showed on Tuesday, beating economists’ median forecast for a 0.3% rise in a Reuters survey. Annual inflation, which accelerated for the first time in seven months, also topped the 2.7% expected by economists, and marked the quickest since April. It followed a 2.3% rise in July, which was the slowest in 2 years. The BOK has said consumer inflation is likely to accelerate to around 3% in August and September, before easing again, meaning the latest figures should not come as a surprise to policymakers. Commenting on the data, the finance ministry said the inflation rate was affected by temporary factors such as adverse weather conditions, along with a rise in global energy prices, but that the overall slowing trend in prices was maintained.Broken down by sector, prices of petroleum products jumped 8.1% over the month, agricultural prices surged 10.5%, while public service prices climbed 0.5%. Core CPI, which excludes volatile food and energy prices, rose 3.3% on an annual basis, unchanged from the previous month. More

LONDON (Reuters) – British consumer spending growth lost pace last month, adding to signs of a weakening economy, despite a doubling in cinema takings after the release of the films “Barbie” and “Oppenheimer”, Barclays data showed on Tuesday.Annual growth in consumer spending on credit and debit cards slowed to 2.8% in August from 4.0% in July, which the bank blamed on a continuation of the previous month’s rainy weather. Part of the slowdown also reflected falling inflation – and in particular a 20% year-on-year drop in the cost of vehicle fuel – as spending on essentials such as food and fuel grew just 1.0%, the least since April 2020.Spending on cinema tickets was up 101% on a year earlier, driving a broader rise in spending on entertainment.However, with consumer price inflation still running at 6.8% in July – the highest of any major economy – the data suggests overall household consumption continues to fall in real terms.”Muted spending growth in August is in line with other data sources, such as soft PMIs and stalling consumer confidence, suggesting that the bite from monetary tightening is starting to be felt more acutely,” Barclays economist Abbas Khan said.The Bank of England has raised interest rates 14 times since December 2021 and financial markets expect a further quarter-point increase to 5.5% this month, then a final hike to 5.75% before the end of the year.While Barclays said the rainy weather had weighed on consumer spending, separate figures from the British Retail Consortium on Tuesday showed many shoppers had returned to stores after a washout for retailers in July.Total sales at BRC members grew by 4.1% in cash terms in the year to August – in line with the average annual growth rate over the past 12 months – after dropping to 1.5% in July.Like-for-like sales growth, a measure which adjusts for changes in store space, rose to 4.3% in August from 1.8%.Beauty products had performed strongly, but the BRC said parents appeared to be holding off on purchases of children’s uniforms and shoes until just before the new school year began. Like the Barclays figures, the BRC data is not adjusted for inflation – so falling inflation could lead to lower top-line sales growth, the trade body said.”As the rate of price rises falls, so will the extra spending needed by consumers. As a result, sales growth may fall in the coming months, even if volume growth does not,” BRC Chief Executive Helen Dickinson said. More

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever, financial markets columnist.Australia’s central bank grabs the Asia-Pacific spotlight on Tuesday, its latest interest rate decision topping a bulging regional economic calendar, as the return of U.S. markets after the Labor Day holiday really kicks September trading into gear.Local markets will also be alert to inflation readings from South Korea, the Philippines and Vietnam, a sprinkling of purchasing managers index reports including services PMI from China, and second quarter GDP growth figures from South Korea.The Reserve Bank of Australia is expected to keep its key cash rate unchanged at 4.10% as inflation shows signs of easing, keeping its powder dry for a final hike by the end of the year, according to a Reuters poll.Money market traders are less convinced – current pricing indicates no more than a 50-50 probability of another hike this year, suggesting the RBA’s 400-basis point hiking cycle started in May last year is over.The RBA has surprised markets this year, however, pausing in April and then tightening policy in May. The RBA’s guidance offered on Tuesday could trigger big moves in the Australian dollar.More broadly, Asian markets go into Tuesday with a spring in their step, with the MSCI Asia Ex-Japan stock index up eight out of the last 10 sessions. Japan’s Nikkei 225 index, boosted by the weak yen, is up six days in a row and on its best run since May, and has only declined once in the last 11 sessions.A large part of the mini revival across Asia is down to the rebound in China as investors have given a cautious thumbs up to Beijing’s efforts to support the creaking property sector, markets and wider economy.The latest measures on Friday, together with property developer Country Garden’s bond deal, helped spur a 1.5% jump in China’s blue chip shares, their biggest rise since late July.Country Garden shares ended 14.6% higher on Monday after having jumped almost 20% to their highest level since Aug. 10, and Hong Kong’s Hang Seng mainland properties index rose as much as 10%.Not everyone, however, is happy. Some smaller onshore bondholders are calling for the nullification of the deal, arguing it is unfair and illegal, according to sources and a document.It remains to be seen how long the respite for China lasts.On the political front, hopes of a possible face-to-face meeting between Presidents Joe Biden and Xi Jinping at the upcoming G20 summit in India appear to have been dashed.China’s foreign ministry on Monday said that China’s delegation in New Delhi this weekend will be led by Premier Li Qiang.Meanwhile, markets may have become inured to saber-rattling from North Korean leader Kim Jong Un, but reports on Monday that he is to meet Russian President Vladimir Putin in Russia to discuss weapons may have investors on their toes again.Here are key developments that could provide more direction to markets on Tuesday:- Australia interest rate decision- China Caixin services PMI (August, final)- South Korea GDP (Q2) (By Jamie McGeever; Editing by Josie Kao) More