Weekly Market Recap

Asia Pacific

06/05/2019

Week in review

Week ahead

7/05 – CN – FX Reserves
8/05 – CN – Trade Statistics
9/05 – U.S. – PPI, Trade Balance
10/05 – UK – GDP, Industrial Production, Trade Balance

Thought of the week

The U.S. Federal Reserve (Fed) Committee stayed their hand last week and kept the Fed Fund rate at the range of 2.25 - 2.5%, as markets had expected. With the Fed’s dovish stance persisting, Asian central banks have more flexibility to steer monetary policy based on domestic needs, especially as inflation remains subdued. We observe this notably in India and Indonesia. After hiking by 50 basis points last year, the Reserve Bank of India reversed course and cut rates by the same amount this year, attributing it to weak growth and inflation. Bank of Indonesia, which had aggressively hiked rates in 2018, also kept policy rates on hold in the most recent policy meeting, citing low inflationary pressures. Investors who have grown accustomed to preparing for rising rates over the last few years should review their fixed income portfolio holdings, particularly their duration and sector exposure, while remaining vigilant about potential monetary policy changes in the future.

Chart of the week

Source: BIS, J.P. Morgan Asset Management.
*Count covers the 38 central banks included in the Bank for International Settlements’ central bank policy monitor. Year-to-date data reflect most recently as of 03/05/19.

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