Asia Week Ahead: Australia Rate Decision, Data On China, India, Japan

The RBA is expected to hold interest rates at 4.35% as Australian inflation cools faster than projected.

Australia's rate decision is the highlight of the week. Key data releases include China’s inflation and credit, India's July CPI, and Japan's June current account balance and July PPI

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Australia : RBA expected to keep rates unchanged

We expect the Reserve Bank of Australia to hold the cash rate at 4.35% at Tuesday’s monetary policy meeting. Inflation surprised decisively to the downside in the second quarter. Headline CPI eased to 3.9% year-on-year, well below the RBA’s 4.8% forecast, driven by softer housing and transport costs. While services increased to 4.0% YoY, the RBA’s preferred trimmed mean CPI series fell below its estimate of 3.8% YoY. It stands at 3.6% YoY, suggesting underlying prices continue to moderate gradually. Collectively, price pressures are easing faster than the RBA envisaged, strengthening the case for an extended hold through year-end.

China: CPI and PPI seen moderating

China releases its inflation data over the weekend. We expect CPI inflation to edge down slightly to 0.9% YoY in July, and PPI inflation to cool to 3.8%. Purchasing managers’ index data showed ex-factory prices cooling. China’s credit data should be released sometime during the week. We expect weak credit demand to continue amid limited corporate investment appetite and soft consumer borrowing.

India: Headline inflation expected to remain steady

India releases its July CPI inflation data on Wednesday. The market expects inflation to remain unchanged at 4.4% YoY. Food inflation should soften from June's elevated 5.1%, supported by ample cereal stocks. Fuel inflation, however, is set to edge higher as recent petrol, diesel and compressed natural gas (CNG) price hikes continue to pass through. Services inflation is expected to remain sticky, reflecting persistent underlying cost pressures.

Japan: PPI and current account

Japan’s key data releases include the June current account balance on Monday, and July PPI on Thursday. The consensus expects producer prices to rise to 7.5% YoY from 7.1% in June. This reflects continued upstream price pressure from higher energy prices, yen weakness and import costs.

Key events in Asia next week

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