Manufacturing, trade, inflation and GDP releases dominate the Asian economic calendar in the coming week, though an Indonesian central bank policy meeting is likely to capture the most attention
The Indonesian central bank, Bank Indonesia (BI), announces the outcome of its monetary policy meeting on Tuesday (23 October). We believe it’s time for BI to pause the tightening started in May this year, and subsequently intensified amidst the emerging market currency contagion that saw the Indonesia rupiah (IDR) plunge in value. As part of its currency stabilisation drive, BI lifted the policy rate by a total 150 basis points to 5.75% through to September.
With well-behaved inflation, dipping below 3% year-on-year in September for the first time in over two years, monetary policy remains geared towards stabilising the Indonesian rupiah. And the USD/IDR appears to have traded tightly around 15,200 this month after an early October spike. Recent economic reports-, such as the trade balance swinging back to surplus in September and a lower-than-expected government budget deficit this year, are contributing to improve investor sentiment towards the currency. We believe this has taken pressure off the central bank to hike rates at the forthcoming policy meeting.
A third-quarter reading on US GDP and a flurry of central bank policy meetings top the agenda next week. The European Central Bank is not expected to deviate from its plan to unwind quantitative easing by the end of the year and we're not expecting any big moves from the Scandi banks. But Canada will likely raise rates and could signal more to come
The US data highlight will be 3Q GDP, with another strong outcome looking likely. Consumer spending continues to be supported by massive tax cuts and a robust jobs market, whilst healthy corporate profitability and a positive economic outlook are encouraging investment. Net trade is likely to swing back sharply after providing huge support to growth in 2Q, but this will at least be partially offset be some rebuilding of inventories. As such, we look for US growth to come in at an annualised 3.6% rate versus the 3.2% consensus and the 4.2% outcome from 2Q18.
Durable goods orders for September should also be good once the volatile aircraft component is stripped out, so this should be more than enough to keep the Federal Reserve in tightening mode. We continue to look for a December interest rate rise followed by three more in each of the first three quarters of 2019.
With central banks in Russia and Turkey likely to keep policy rates on hold and no surprises expected from Polish budget data, we see a relatively mild week in EMEA and Latam
The Bank of Russia is likely to keep its key rate unchanged at 7.5% at the 26 October meeting, as the CPI rate- having shown some acceleration to 3.6% YoY as of mid-month- is so far on track to stay within the recent official guideline of 3.8-4.2% for year-end and 5.5-6.0% year-on-year for the first half of next year.
The communique is likely to be focused on the monetary authorities’ assessment of the inflationary risks amid external uncertainties and preparation for the two percentage point VAT rate hike in 2019. The wording could affect expectations for the December meeting, as the market is starting to assign more probability to another hike two months from now.
Discover what ING analysts are looking for next week in our global economic calendars