The Federal Reserve’s decision to cut interest rates by a quarter of a percentage point has sent shockwaves through the market, with investors bracing for more central bank meetings. The Bank of Japan (BOJ) is set to make its move on Thursday, and traders are eagerly awaiting Governor Kazuo Ueda’s remarks.
The BOJ is expected to keep interest rates on hold, although Japanese swap rates imply a 60% probability of a 25-bp rate hike in January. A decision is not fully priced until May, with the BOJ only expected to tighten by 45 bps by December.
In contrast, the Philippine central bank is poised to cut its key policy rate by a quarter point to 5.75%, as inflation remains under control and the economy weakens. Taiwan’s policymakers are also likely to maintain the status quo, keeping the key policy rate at 2% for next year.
The Fed’s move has raised inflation concerns, with long-run neutral rates being significantly increased and the 2025 inflation outlook revised upwards. The decision has sparked a selloff in stocks and Treasuries, with the dollar surging to a two-year high. Emerging market assets are likely to face heavy pressure on Thursday.
With central banks taking turns making decisions, investors must stay vigilant. The BOJ’s move will be closely watched, while emerging markets prepare for potential fallout from the Fed’s rate cut.
Source: https://www.reuters.com/markets/asia/global-markets-view-asia-graphic-2024-12-18