In today’s briefing:
- Asian Monetary Policy: More Tightening on the Cards In 1H23
- Malaysia’s 15th General Election: Drivers and Scenarios
- Curvaceous ECB Policy
- Thailand: Downshift In Growth Momentum In Sep 22
Asian Monetary Policy: More Tightening on the Cards In 1H23
- Federal Reserve Chair Jerome Powell put paid to any hopes of a dovish pivot as the US labour market continues to defy expectations of a slowdown.
- Until there is a significant moderation in the economic momentum and/or a cooling of inflationary pressures, the Fed will continue to press ahead with more rate hikes
- Thus, Dollar strength is likely to remain as yield differentials with other currencies widen. We summarise our expectation for Asian monetary policy in the following table:
Malaysia’s 15th General Election: Drivers and Scenarios
- Increasing voter dissatisfaction could hurt the incumbent Barisan Nasional (BN) govt but party machinery, tactical voting and racial sentiments could offset this. Political turbulence will, however, persist.
- Our baseline: Barisan and Pakatan will be virtually tied in Peninsular Malaysia. Barisan’s East Malaysian allies are likely to do well, allowing Barisan to reassemble the pre-dissolution government excluding Perikatan.
- A likely narrow result means that parliamentary manoeuvres and intra-party politics will remain sources of uncertainty after the elections. UMNO party elections within six months from GE15 will be key.
Curvaceous ECB Policy
- Rapid rate hikes are trying to crush excess inflation as recessionary forces build. Monetary policy will eventually need to loosen back towards a neutral setting.
- Markets price cuts by the BoE and Fed during 2024 when the Euro curve slopes up again, despite the ECB now recognising it will first need to hike beyond neutral.
- We see a more curvaceous ECB path as likely to be followed. The monetary policy strategy is now clear, with evidence of falling demand supporting an inversion.
Thailand: Downshift In Growth Momentum In Sep 22
- Thailand’s growth momentum stalled in Sep 22 amid declines in the agriculture sector, and headwinds from external demand, culminating in a moderation in consumption and investment growth.
- But, stronger-than-expected tourism remains the economy’s saving grace, as a more aggressive marketing effort starts to pay dividend.
- We hew to our 2022 growth forecast of 3.5% as slower export growth will be offset by vibrant tourism revenues.
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