Traders work beneath a monitor displaying foreign exchange rates at the trading floor of the Philippine Stock Exchange in Bonifacio Global City (BGC), Metro Manila, the Philippines. (Photographer: Carlo Gabuco/Bloomberg)  

After India's Rate Cut, Watch the Philippines Next, S&P Says

(Bloomberg) -- The Reserve Bank of India’s unexpected interest-rate cut Thursday is set to be the first in a wave of monetary policy easing across Asia in 2019, with the Philippines probably next.

After the Federal Reserve took an unusually dovish turn at the January meeting, and with emerging markets rebounding this year, Asia’s central banks are “all going to want to do it,” said Shaun Roache, chief economist for Asia and the Pacific at S&P Global Ratings.

In the Philippines, where the central bank downgraded inflation forecasts on Thursday while keeping the benchmark interest rate unchanged, the rate-cut fever is especially strong. Consumer price growth, which eased to 4.4 percent in January, will probably decelerate rapidly toward the 2 percent to 4 percent target range, prompting two interest-rate cuts this year, said Roache.

After India's Rate Cut, Watch the Philippines Next, S&P Says

Cheaper oil prices and base effects are helping the inflation picture in the Philippines. That’s set to push the real interest rate -- which for some time had been among the lowest in the world -- higher and toward a range that will quell financial instability concerns.

Outside of Manila, Indonesia tops the list of other nations looking to reverse policy tightening this year, though probably after the general elections due in April, said Roache. The two economies were the most aggressive hikers in the region in 2018, each raising interest rates by 175 basis points.

Thailand’s low inflation should have held the central bank back from raising the benchmark interest rate in December, and policy makers will likely reverse that move this year, said Roache. Thai consumer inflation has decelerated for five straight months and is lingering near zero, below the central bank’s 1 percent to 4 percent target range.

Don’t rule out others across Asia slashing interest rates in 2019 as the economic growth outlook dims. All around the region, public expenditures have been steady but “private investment hasn’t come back yet,” said Roache.

©2019 Bloomberg L.P.