Asia Week Ahead: Korean Central Bank To Extend Pause; Inflation Likely Subdued In China

By Robert Carnell, Min Joo Kang and Nicholas Mapa of ING Economics

Saturday, July 8, 2023 11:14 PM EST

brown and black printed textile

Image Source: Unsplash

The Bank of Korea meets to discuss policy next week while India and China report inflation figures. Meanwhile, Singapore will release its latest GDP data.

Inflation in India

June CPI data for India will likely show that inflation remained in the low 4% area, close to the mid-point of the Reserve Bank of India’s target range of 2-6%. This leaves real policy rates at one of the highest levels in the region (nominal policy rate is 6.5%) and may help to explain the rupee's recent resilience.

We also get India’s industrial production data for June. June’s Manufacturing PMI dropped to 57.8 from 58.7, so we may well see the rate of growth moderate from the 4.2% year-on-year rate recorded in May.

China loan and inflation reports

China’s aggregate financing data for June is set to be released. New CNY loans will likely come in lower than the CNY2806bn level recorded in June last year, reflecting weak investment. CPI data will also be published, likely showing inflation remains close to zero. Weak domestic demand is the main culprit, though there are also some helpful base effects and we should see inflation return to around a 2% rate over the coming months. PPI inflation will remain strongly negative, reflecting weak factory gate prices as well as subdued commodity prices.

BoK likely to extend pause but stay hawkish

The Bank of Korea will hold a policy meeting next Thursday. As inflation is slowing to the 2% range, the BoK is expected to keep its policy rate at the current 3.50% level. We think the central bank will continue to remain hawkish so as not to give market participants an easing signal too early.

Singapore GDP growth to see a slight bounce

Singapore is set to release second-quarter GDP figures next week. First quarter GDP showed that the economy contracted from the previous quarter but still managed to eke out a 0.4% YoY gain. Singapore faces the twin challenge of contracting exports and industrial production as global trade slows. One bright spot is retail sales, which have provided some support amid the resurgence of visitor arrivals. This has helped to offset softer demand caused by still-high inflation.

We expect second-quarter GDP to bounce back, with a shallow expansion of 1.4% YoY. Growth will likely be stuck in this range until global trade prospects improve.

More By This Author:

FX Daily: Dollar Late To The Party
Key Risks To The Global Outlook
Bank Of England Survey Raises Hope Of Lower Inflation

Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...

Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. ING forms part of ING Group (being for this purpose ING Group NV and its subsidiary and affiliated companies). The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Reasonable care has been taken to ensure that this publication is not untrue or misleading when published, but ING does not represent that it is accurate or complete. ING does not accept any liability for any direct, indirect or consequential loss arising from any use of this publication. Unless otherwise stated, any views, forecasts, or estimates are solely those of the author(s), as of the date of the publication and are subject to change without notice.

The distribution of this publication may be restricted by law or regulation in different jurisdictions and persons into whose possession this publication comes should inform themselves about, and observe, such restrictions.

Copyright and database rights protection exists in this report and it may not be reproduced, distributed or published by any person for any purpose without the prior express consent of ING. All rights are reserved. ING Bank N.V. is authorised by the Dutch Central Bank and supervised by the European Central Bank (ECB), the Dutch Central Bank (DNB) and the Dutch Authority for the Financial Markets (AFM). ING Bank N.V. is incorporated in the Netherlands (Trade Register no. 33031431 Amsterdam). In the United Kingdom this information is approved and/or communicated by ING Bank N.V., London Branch. ING Bank N.V., London Branch is deemed authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. The nature and extent of consumer protections may differ from those for firms based in the UK. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.. ING Bank N.V., London branch is registered in England (Registration number BR000341) at 8-10 Moorgate, London EC2 6DA. For US Investors: Any person wishing to discuss this report or effect transactions in any security discussed herein should contact ING Financial Markets LLC, which is a member of the NYSE, FINRA and SIPC and part of ING, and which has accepted responsibility for the distribution of this report in the United States under applicable requirements.

less

How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.