Emerging Asia's monetary policy

Central banks across Asia continue to look at maintaining an accommodative monetary stance. In Singapore, the Monetary Authority of Singapore (MAS) reduced the slope of its SGD NEER policy band slightly. While market concerns on growth have risen, the MAS itself appears reluctant to ease policy significantly (see In Focus). 

Bank Indonesia, despite keeping its policy rate on hold as expected, shifted its rhetoric away from a tight monetary stance and hinted at late Q4 as a possible window for easing. A small and growing risk is seen that BI may shift to an easing stance from late Q4, as early as the 17 November meeting - especially if disinflationary pressures are stronger than expected and concerns over IDR levels recede, says Barclays. 

This week, the Bank of Korea held the policy rate at 1.5% in October, as expected, while the governor's Q&A replies and the statement were as neutral as the previous meeting. Importantly, the BoK revised its growth forecasts for 2015 and 2016 marginally lower, cutting both 10bp, to 2.7% and 3.2%, respectively, slightly better than our expectation of at least a 20bp downward revision, notes Barclays. This suggests that the BoK is comfortable with its Q3 growth projection of 1.1% q/q sa, encouraged by recent signs of a stronger revival in domestic demand. 

Accompanied by the shallower-than-expected growth downgrade, the neutral statement and the governor's comment add slight risks to the expectation of a further rate cut in November, foresees Barclays.