OPR dominates
THIS week is heavy on economic data with the announcement of the overnight policy rate (OPR) scheduled for Thursday and industrial production index, manufacturing sales, and wholesale and retail trade figures coming out on Friday.
Additionally, the central bank will tomorrow announce its international reserves as at Aug 30.
Based on the latest Bloomberg poll, all five analysts surveyed including UOB Global Economics and Markets Research senior economist Julia Goh expect Bank Negara to maintain its policy rate at 1.75%.
UOB said the government has begun to ease restrictions for business operations and social activities based on the progress of the national and states’ vaccination rates from time to time.
This augurs well for the country’s economic recovery into the fourth quarter of 2021.
Hence, UOB has reiterated its call for a steady policy rate at 1.75% at the upcoming monetary policy meeting.
According to ING senior economist, Asia, Prakash Sakpal, Bank Negara will likely pause its rate hikes.
He said the return of political stability under Prime Minister Datuk Seri Ismail Sabri Yaakob may pave the way for more fiscal stimulus.
This, together with the recent outperformance of the ringgit, would allow Bank Negara to leave the overnight rate at the current record low level of 1.75%, he said.
It considers Bank Negara among the last Asian central banks to tighten, though not until after 2022.
Meanwhile, OCBC Bank sees the need to cut interest rates by 25 basis points despite previous decisions to hold.
Its economist Wellian Wiranto said OCBC Bank is of the view that further monetary policy accommodation is helpful to smoothen the path towards recovery in the fourth quarter of 2021 and into 2022.
China trade data, inflation
A raft of data is expected from China this week including August trade data, official reserves, consumer price index (CPI) and producer price index.
Bloomberg estimates China’s August exports to expand 17.2% year-on-year (y-o-y) from 19.3% y-o-y in July.
It also expects imports to grow 27% y-o-y from 28.1% in July and trade surplus at US$54.7bil (RM226.81bil) from US$58.56bil (RM242.82bil) in July.
ING chief economist, Greater China, Iris Pang expects base effects to lift China’s imports and exports to double-digit gains but believes that trade activity may have slowed on a month-on-month basis due to Covid-19-related work stoppages in key logistics hubs.
China economy manufacturing
She said these supply chain disruptions may fade by mid-September or October but expects the backlog to affect the US Thanksgiving shopping season.
According to IHS Markit, August Caixin China General Manufacturing PMI pointed to export orders declining for the first time since February while input costs rose sharply.
The August producer price index reading and trade data will be followed closely for a confirmation of the statistics, particularly during a month when China had also experienced sustained Covid-19 disruptions.
Bloomberg projected China’s credit to have jumped in August, driven by a rebound from a seasonal lull and stronger policy support to cushion a slowdown.
RBA decision
THE Reserve Bank of Australia (RBA) is expected to keep its rates unchanged this week.
According to the latest Bloomberg poll, all 11 analysts surveyed expect the RBA to maintain its policy rate – the record low 0.1%.
RBA
UOB shares the same view as it sees core inflation returning to the RBA’s target band by early 2023 but wage growth not reaching 3% until much later in 2023.
With the RBA reiterating that inflation would need to sustainably be in the target band, and allowing for it to take some time to make such an assessment, UOB sees some risk of a rate rise in late-2023 but more likely for the first hike to occur only in 2024.