The Week Ahead: All eyes on Bank Negara’s monetary policy meeting, Xi’s three-nation European trip
The Week Ahead: All eyes on Bank Negara’s monetary policy meeting, Xi’s three-nation European trip
Will Bank Negara Malaysia’s Monetary Policy Committee follow its Indonesian counterparts by raising interest rates when it holds its next meeting on Wednesday and Thursday?
According to a Bloomberg poll of economists as at May 3, two economists expect no change to the overnight policy rate of 3.0%. As inflation has been broadly stable to lower across the region, coupled with increasing exports and supportive labour markets, most central banks are sanguine on the growth outlook, DBS Group Research said in a note last Friday.
“In contrast, portfolio flows and currency stability have been the main sticking points, owing to a wider rate differential, with five of the six Asean-6 currencies down more than 3% on a year-to-date basis against the [US] dollar,” the research house added.
It opined that the ringgit’s volatility will continue to be the focus of Bank Negara’s attention during its May decision. The ringgit has outperformed over the past month, reflecting some effectiveness of ongoing initiatives to encourage inflows, stated DBS.
The Bank of England (BoE) will also announce its rate decision on Thursday.
According to a Bloomberg survey, four economists polled expect the BoE to keep its official bank rate unchanged at 5.25%.
“With wage growth coming in hotter than expected, and services inflation remaining stickier than expected, our economist believes the BoE will likely prefer to wait longer for more confidence that inflationary pressures are on the wane.
“We expect the BoE to deliver its first cut in August, rather than June, but still look for the bank rate to be cut three times by a cumulative 75bps (basis points) over 2024, but the view remains highly data dependent,” UOB Global Economics & Markets Research said in a note last Friday.
The UK’s first quarter 2024 gross domestic product (GDP) data will be released on May 10.
The Reserve Bank of Australia (RBA) will also be conducting its monetary policy meeting this week on May 7, which will be watched closely by market observers and participants.
Recent Aussie data indicates that progress on inflation has stalled on a monthly basis and has even started to nose higher, said ING in a May 2 article.
“That said, Australian inflation has actually performed better than we have been expecting. We had looked for it to rise sooner and by more. On that basis, inflation isn’t causing us any undue concern. This looks to us like it will be another no-change meeting,” it added.
According to the Bloomberg poll of 11 economists (as at May 3), 10 expect the RBA to keep its cash rate target unchanged at 4.35% while one sole economist expects a 25bps hike to 4.60%.
The week will not see much economic and fiscal policy data announced. However, on the geopolitical side, Chinese President Xi Jinping will start his five-day visit to Europe on Sunday (May 5), his first trip to the European Union in five years.
Xi will be visiting France, Serbia and Hungary. The visits come after US Secretary of State Antony Blinken met with Xi in Beijing on April 26, where he stressed the importance of “responsibly managing” the differences between the US and China.
Xi’s visit to the three European countries signals Beijing’s interest in taking on a larger role in the conflict between Russia and Ukraine that has upended global political and economic security. China claims neutrality in the Ukraine conflict.
Meanwhile, Bank Indonesia will announce the republic’s GDP growth for the first quarter of the year (1Q2024) on May 6. Bloomberg estimates a 5.08% year-on-year increase, while UOB is chalking in a 5.2% y-o-y growth.
“Our economist expects 1Q2024 GDP growth to come in stronger than the previous quarter on the back of several data related to domestic consumption and investment that showed acceleration in the first quarter of 2024.
“This can be attributed to geopolitical stability during the elections, followed by accelerated government spending in [the] early [part of the] year, especially related to election agenda and social assistance disbursement,” UOB said in a May 3 note.
China will release its April trade data on May 9. ING expects the data to come in relatively sluggish, with export growth expected to be flat at around 0% y-o-y and import growth faring better at 6.4% y-o-y.
China will publish its Caixin services and composite purchasing managers’ index on Monday. The market expects the index to show a slight cooling from March. Foreign reserves data will also be released sometime on Tuesday.
Meanwhile, the Senior Loan Officer Opinion Survey, which will be released on May 8, will provide insight on how much tighter lending conditions have become in the US.
Particularly important will be Taiwan’s inflation data, which shows the impact of the electricity price hikes from April 1, said UOB.
Ahead of the increase in electricity prices in March, Taiwan’s central bank unexpectedly raised its benchmark discount rate by 12.5bps to 2.00% — the highest since December 2008 — and left the door open for another rate increase should inflation prove to be more persistent.
“Our base case is for CBC’s (Central Bank of the Republic of China) discount rate to stay anchored at 2.00% for the rest of this year but incoming data will be crucial,” said UOB in the May 3 report.
A slew of Bursa Malaysia-listed companies will be announcing their financial results for the quarter ended March 31 this week, starting with Mi Technovation Bhd on May 8, followed by Carlsberg Brewery Malaysia Bhd, Hartalega Holdings Bhd and Aemulus Holdings Bhd on May 9.
They will be followed by Swift Haulage Bhd on May 10, and Heineken Malaysia Bhd, Sentral Real Estate Investment Trust, Pentamaster Corp Bhd, Greatech Technology Bhd and Mr DIY Group (M) Bhd on May 11.
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