Emergency rate cuts loom for Asia as coronavirus slams economies

Bloomberg Singapore | Updated on March 11, 2020

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India, South Korea and Malaysia could deliver off-schedule rate decisions

Central bankers across Asia-Pacific must consider whether they can afford to wait until their next scheduled policy meetings or respond sooner to mounting global risks from the coronavirus outbreak and oil-price plunge.

The Federal Reserve set the pace with an emergency 50 basis point interest rate cut last week. None of Asia’s central banks immediately followed the Fed, but some have added liquidity.

With policy meetings still some weeks away for India, South Korea and Malaysia, analysts see those countries as being prime candidates to deliver off-schedule rate decisions. Much will depend on whether global markets rally and credit conditions ease, which would take the pressure off central banks to move aggressively.

“There is a strong impetus to piggy-back on the Fed to ease in Asia,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. “Softer oil prices and demand-shock pressures could precipitate intra-meeting action,” he said.

The Asia calendar looks quiet up until the Fed’s March 18 rate decision in Washington. Hours later, policy makers in Japan, Indonesia and the Philippines are scheduled to announce their rate decisions, with Thailand and New Zealand following on March 25.

In China and Vietnam, where central banks do not follow a schedule of publicly announced meetings, a move can come at any time.

Thai central bankers signalled on Monday that they will wait to adjust policy until their regular meeting, as they examine developments in oil and global markets. The Bank of Thailand cut its benchmark interest rate to a record low on February 5 amid worries about coronavirus, while also citing the need for liquidity injections and debt restructuring.

Here are a few Asian central banks that could move in coming weeks:


The Reserve Bank of India does not have a scheduled meeting until April 3. India so far has reported few virus cases and its economy is less vulnerable to external risks, but Governor Shaktikanta Das has signalled easing on the horizon. Hours before the emergency Fed cut, Das told Bloomberg that there was a strong reason for coordinated action and that he was prepared to cut interest rates.

Varathan sees the RBI poised to take action before its scheduled meeting, but says the central bank is more focused on liquidity injections than a benchmark interest-rate cut — partly because interest-rate transmission has been faulty, and since targeted relief would be less destabilising for the currency. Inflation also remains well above the central banks 2 per cent-6 per cent target band, making a rate cut less palatable.

Key to an unscheduled move will be the outcome of the upcoming Fed meeting, said Kerry Craig, a global market strategist at JP Morgan Asset Management in Melbourne.

If the Fed were to make a very large move in rates — more than 50 basis points for example — then there will be more pressure applied to those central banks not scheduled to meet until April, such as India, to bring forward a policy response and make a larger cut, he said.

The last time Indian officials made an unscheduled monetary policy announcement was in 2015, when they acted alongside more than a dozen central banks in easing interest rates early that year with low oil prices causing subdued inflation.

South Korea

Not slated to meet until April 9, the Bank of Korea is a top candidate for an unscheduled move, said Tuuli McCully, head of Asia Pacific economics at Scotiabank in Singapore. “After keeping rates on hold in February, South Korea’s central bank is behind its central bank peers who have eased policy much more decisively,” she said.

The bank convened an emergency meeting a day after the Feds surprise rate cut, but disappointed markets by falling short of pledging action. Expectations are growing that the bank will convene an off-cycle policy meeting this month to cut rates, as it did in the depths of the global financial crisis.


Bank Negara Malaysia has eased interest rates twice this year — a rare move globally, and one that goes against BNMs own tendency to avoid back-to-back cuts. Its next gathering is scheduled for May 5 — the most distant among central bank’s in the region with scheduled decisions.

The central has not had any unscheduled interest-rate moves since at least 2009, but in November unexpectedly announced a reduction in its reserve ratio. The softening in oil prices gives the bank added impetus for an immediate policy reaction.

Malaysia is most exposed to the negative impacts of low energy prices as a net exporter, said Steve Cochrane, chief Asia-Pacific economist at Moody’s Analytics in Singapore. “While they just eased recently, they may ease again quickly.”

Published on March 11, 2020

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