Asia: Dovish twist in the larger economies – ABN AMRO
Arjen van Dijkhuizen, senior economist at ABN AMRO, suggests that with slowing Asian growth, downside risks have risen, and the question arises whether policy makers in Asia have sufficient room to lean against the wind and take stabilisation measures if needed.
“Focusing on the largest economies, we expect the Chinese authorities to continue with cautious monetary easing (the PBoC cuts RRRs by another 100bps this month). We still do not expect aggressive easing though, as the authorities have to continue their balancing act between safeguarding growth at the short term and ensuring an orderly financial deleveraging process over the longer term. Meanwhile in India, we expect a more dovish monetary policy under the new governor Das.”
“We do not foresee a rate hike anymore this year. Should inflation pressures be contained (the real policy rate is currently around 4%) and the current account remains under control, the RBI may even opt for one or more rate cut. In South Korea, we now expect only one (instead of two) rate hikes in 2019.”