KUALA LUMPUR: After Bank of Korea’s hike in interest rate, central banks in Malaysia, the Philippines, Thailand and Taiwan are also expected to raise their benchmark policy interest rates over the coming months, says BMI Research.
BMI Research, part of Fitch Group, said monetary policy will likely be less accommodative in a number of major Asian economies over the course of 2018.
“We expect central banks in Malaysia, the Philippines, Thailand, South Korea, and Taiwan to raise their benchmark policy interest rates over the coming months as inflationary pressures rise and to ensure macroeconomic stability,”in a report.
The Bank of Korea (BoK) became the first major central bank in Asia to raise its benchmark interest rate in 2017.
“Excluding those from the Pacific, we expect Asean central banks such as Malaysia, the Philippines , and Thailand as well as South Korea and Taiwan to raise their benchmark policy rates amid rising inflation and in an effort to safeguard macroeconomic stability.”
In the case of Malaysia, it said Bank Negara Malaysia opened the door to monetary tightening during its November 9 monetary policy meeting, and it expects the Overnight Policy Rate to be raised by 25 basis points to 3.25 per cent in 2018.
“Economic growth is likely to be robust due to continued demand for electronics and improvements in oil prices, and therefore, BNM is likely to hike interes t rates to ensure that the economy does not overheat.”
It opined that inflation is also likely to trend higher in 20 18 as the effects of increased handouts as part of the 2018 budget kick in, with Malaysia set to hold its general election by Augus t 2018.
The Bang ko Sentral Ng Pilipinas (BSP) will likely stand pat on its interest rate decision at its last meeting for the year on December 14 , but BMI expects it to hike the benchmark interes t rates by 50 basis points to 3.50 per cent in 2018.
Bank of Thailand is also expected to raise interest rates by 25 basis points towards the end of 2018, bringing the benchmark lending rate to 1.75 per cent.
The Central Bank of the Republic of China (Taiwan) (CBC). which left its benchmark discount rate unchang ed at 1.375 per cent since the middle of 2016, will also gradually normalise monetary policy and raise the rates by 12.5 basis points to 1.50 per cent in 2018.
Bank of Korea is also expected to continue its hiking cycle with a 25 basis points hike to 1.75 per cent in 2018.