Asia week ahead: Bank Indonesia and Bangko Sentral ng Pilipinas likely to extend pause

Bank Indonesia (BI) and the Bangko Sentral ng Pilipinas (BSP) both hold policy meetings next week. Moderating inflation coupled with the Federal Reserve hold at the June meeting means we are expecting both BI and BSP to hold rates steady. BI has been on hold since February, while this will be the second straight meeting that the BSP will leave the policy rate at 6.25%.

We expect BI Governor Perry Warjiyo and BSP Governor Felipe Medalla to be on hold in the near term while assessing the outlook for the Fed.

Loan prime rates in China are set to track the recent cut from the People’s Bank of China (PBoC). Thus, we are looking for the 1Y loan prime rate to fall to 3.55% (from 3.65%) and the 5Y loan prime rate to settle at 4.2%.

Nationwide CPI inflation and PMI indices are due for release in Japan next week. Recently reported Tokyo CPI inflation numbers suggest that we could see a similar downtrend in the national figures with headline inflation possibly dipping to 3.2% year-on-year from 3.5%. Core inflation excluding food and energy however could be sticky and remain close to the 4% range.

PMI indices recently posted record levels of expansion but we feel that we could see a reversal in June. Despite this potential pullback, we still expect both the services and manufacturing indices to report a solid expansion.