Week in review
- U.S. PCE at 2.3% y/y and core PCE at 2.8% y/y in Oct
- Australia Oct CPI at 2.1% y/y, below consensus
- Tokyo core CPI rose to 2.2%, above consensus
Week ahead
- U.S. ISM PMIs, JOLTs, non-farm payrolls, unemployment rate
- China Caixin PMIs
- India interest rate decision
Thought of the week
The Bank of Korea delivered a surprise 25bps cut last week, marking the first back-to-back rate cut since the Global Financial Crisis. Growth estimates were revised down on a bearish outlook that exports growth will “fall short of initial expectations”, while forward guidance turned more dovish with half of the members open for a cut in the coming three months. This meeting undoubtedly has sent across a sense of urgency, but domestic growth appears to be slowing not collapsing. Thus, this decision likely reflects a pre-emptive measure to tap domestic demand ahead of Trump tariffs, instead of reacting to recession risks. Therefore, although the current interest rate level is still restrictive and can use some easing, continuing down the path of consecutive cuts may not be necessary. Instead, a lower terminal rate to below neutral should suffice to stimulate growth, with market pricings implying three more cuts next year.
Korea Base Rate forward expectations
Market implied policy rate
Market data