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28 Mar 2014
Asia EM Express: Central banks of Philippines and Taiwan keep key interest rates unchanged at March meetings
FXStreet (Łódź) - The Philippine central bank and the Central Bank of Taiwan held monetary policy meetings on Thursday and both left their benchmark interest rates unchanged.
Philippine central bank, Bangko Sentral ng Pilipinas, kept the benchmark interest rate at 3.5%, which has remained unchanged since October 2012 when it was cut from 3.75%.
The reserve requirement ratio (RRR) on the other hand was raised by 100bp to 19%, which move the central bank's governor Amando M Tetangco explained as “intended to guard against potential risks to financial stability that could arise from continued strong liquidity growth and rapid credit expansion.”
Tim Condon, Head of Research-Asia at ING suggests that the hike “was aimed at boosting stubbornly low money market interest rates, which the honchos at the BSP may fear undermine the credibility of their policy interest rate corridor.”
Furthermore, the Monetary Board presented its inflation forecast, according to which CPI should stay close to 4% this year and to 3% in 2015. GDP estimates were cut to 4.2% from 4.3% in 2014, and to 3.2% from 3.3% next year.
Meanwhile, the Central Bank of Taiwan decided to leave rates unchanged at 1.88% for the eleventh consecutive quarter, as projected in the face of low inflation (one of the lowest in Asia) and shaky exports growth.
When asked about the timing of the next rate hike, the central bank's governor Perng Fai-nan said that it depended on “future goods prices, the output gap and the global economy," and that a moderately accomodative monetary policy would continue for now.
Furthermore, China Premier Li Keqiang said on Thursday that the 2013 mini stimulus was likely to be repeated, through targeted policies focusing on housing and railway investment, so that China's government could be confident it could “keep growth within a reasonable range". He also stressed that the financial sector should be more supportive of the real economy and "reduce corporate financing costs through various monetary policy instruments."
In the opinion of Nomura's Research Analyst Zhiwei Zhang, Li Keqiang's speech hints at a planned acceleration of policy easing, as without it growth would most probably fall below 7% in the second or the third quarter of the year.
“We reiterate our view that both monetary and fiscal policies will be loosened in Q2. We expect a cut of reserve requirement ratio by 50bp in Q2 and another cut in Q3. The likelihood of an
interest rate cut is rising as well, although it is not yet our baseline view.”
Economic data
On an annual basis Thai industrial production fell 4.4% in February, up from the 6.4% drop in January, the Office of Industrial Economics Thailand informed on Thursday. Analysts expected less decline of 3.5%.
South Korea also released industrial output data, which showed a 4.3% increase year-on-year in February, compared with the 4.3% fall the previous month. Industrial Output growth declined 1.8%, down from the 0.1% drop. The service sector output slid 0.4%, following a 0.7% rise.
Tim Condon, Head of Research-Asia at ING predicts that “IP and service industry activity bounce to their average 4Q index levels in March, which would put 1Q14 IP growth at 1.1%, and service industry activity growth at 2.2%.”
The Manufacturing BSI, showing the opinion of manufacturing executives regarding production expectations, order books and finished goods inventories and released by the Bank of Korea, decreased to 80 in April, from 82 seen in March.
Technicals
The Chinese yuan remained practically unchanged on Thursday against the dollar, trading close 6.2122. The daily USD/CNY FXStreet Trend Index was slightly bullish, and the OB/OS Index neutral. RSI was neutral at 71.3179 at the last close. Daily 2-StDev Volatility Bandwidth was expanding at 350 pips, with ATR (14) shrinking at 171 pips. The 1D 200 SMA was at 6.1066, while the 1D 20 EMA at 6.1712.
Philippine central bank, Bangko Sentral ng Pilipinas, kept the benchmark interest rate at 3.5%, which has remained unchanged since October 2012 when it was cut from 3.75%.
The reserve requirement ratio (RRR) on the other hand was raised by 100bp to 19%, which move the central bank's governor Amando M Tetangco explained as “intended to guard against potential risks to financial stability that could arise from continued strong liquidity growth and rapid credit expansion.”
Tim Condon, Head of Research-Asia at ING suggests that the hike “was aimed at boosting stubbornly low money market interest rates, which the honchos at the BSP may fear undermine the credibility of their policy interest rate corridor.”
Furthermore, the Monetary Board presented its inflation forecast, according to which CPI should stay close to 4% this year and to 3% in 2015. GDP estimates were cut to 4.2% from 4.3% in 2014, and to 3.2% from 3.3% next year.
Meanwhile, the Central Bank of Taiwan decided to leave rates unchanged at 1.88% for the eleventh consecutive quarter, as projected in the face of low inflation (one of the lowest in Asia) and shaky exports growth.
When asked about the timing of the next rate hike, the central bank's governor Perng Fai-nan said that it depended on “future goods prices, the output gap and the global economy," and that a moderately accomodative monetary policy would continue for now.
Furthermore, China Premier Li Keqiang said on Thursday that the 2013 mini stimulus was likely to be repeated, through targeted policies focusing on housing and railway investment, so that China's government could be confident it could “keep growth within a reasonable range". He also stressed that the financial sector should be more supportive of the real economy and "reduce corporate financing costs through various monetary policy instruments."
In the opinion of Nomura's Research Analyst Zhiwei Zhang, Li Keqiang's speech hints at a planned acceleration of policy easing, as without it growth would most probably fall below 7% in the second or the third quarter of the year.
“We reiterate our view that both monetary and fiscal policies will be loosened in Q2. We expect a cut of reserve requirement ratio by 50bp in Q2 and another cut in Q3. The likelihood of an
interest rate cut is rising as well, although it is not yet our baseline view.”
Economic data
On an annual basis Thai industrial production fell 4.4% in February, up from the 6.4% drop in January, the Office of Industrial Economics Thailand informed on Thursday. Analysts expected less decline of 3.5%.
South Korea also released industrial output data, which showed a 4.3% increase year-on-year in February, compared with the 4.3% fall the previous month. Industrial Output growth declined 1.8%, down from the 0.1% drop. The service sector output slid 0.4%, following a 0.7% rise.
Tim Condon, Head of Research-Asia at ING predicts that “IP and service industry activity bounce to their average 4Q index levels in March, which would put 1Q14 IP growth at 1.1%, and service industry activity growth at 2.2%.”
The Manufacturing BSI, showing the opinion of manufacturing executives regarding production expectations, order books and finished goods inventories and released by the Bank of Korea, decreased to 80 in April, from 82 seen in March.
Technicals
The Chinese yuan remained practically unchanged on Thursday against the dollar, trading close 6.2122. The daily USD/CNY FXStreet Trend Index was slightly bullish, and the OB/OS Index neutral. RSI was neutral at 71.3179 at the last close. Daily 2-StDev Volatility Bandwidth was expanding at 350 pips, with ATR (14) shrinking at 171 pips. The 1D 200 SMA was at 6.1066, while the 1D 20 EMA at 6.1712.