Ahead Today
G3: University of Michigan survey, speech by Fed Vice Chair Jefferson
Asia: Philippines GDP, Malaysia industrial production, China trade
Market Highlights
The collective tone from recent speeches by several Fed officials reflects a cautious stance about the path forward for monetary policy, with a strong emphasis on inflation risks, data uncertainty, and policy restraint.
Fed’s Hammack stated that inflation is a greater concern than the labour market. She also noted that it is unclear whether further rate cuts are warranted at this time, describing the current policy setting as “barely restrictive”, suggesting a preference for delaying policy easing. Similarly, Fed’s Goolsbee voiced discomfort with cutting rates in the absence of several price indicators, which have been disrupted by the government shutdown, underscoring the importance of reliable data in guiding policy decisions. Fed’s Barr acknowledged that progress has been made on inflation, but there is still “work to do”, while also highlighting the need to remain attentive to labour market risks. Meanwhile, Fed Vice Chair Jefferson is scheduled to speak later today on AI and the economy. Markets have priced in about 70% chance of a rate cut by the Fed in December, though Fed Chair Powell has signalled that such a move is not guaranteed.
In Japan, the yen has recently been deviating from yield differentials with the US. This has been noted by a recent remark from Vice Finance Minister for International Affairs, Atsushi Mimura. He suggested that fundamentals alone aren’t driving the currency, possibly reflecting other factors, including trade, geopolitics, and speculation about Japan’s fiscal outlook.
Regional FX
Asian currencies broadly held firm against the US dollar, which faced some technical resistance, while there was also a sharp rise in October job cuts in the US.
The ringgit held on to its recent gains against the US dollar, and we look for it to strengthen further by end-year, partly on narrowing policy rate gap with the US. Bank Negara Malaysia held its overnight policy rate unchanged at 2.75% in November, as widely expected. The decision reflects an assessment of favourable growth-inflation dynamics, with the MPC considering the current policy stance as being less restrictive, appropriate, and supportive of growth and price stability. The policy statement suggests a broadly neutral tone from policymakers, with no immediate rush to adjust monetary policy. The outlook for growth will be supported by resilient domestic demand, electrical and electronics exports, and tourism.
Meanwhile, Taiwan’s inflation was 1.48%yoy in October, up from 1.25%yoy, but still relatively contained. With Taiwan’s economy still well supported by tech exports and investments, there is likely no urgency for rate adjustment. Vietnam’s inflation eased to 3.25%yoy from 3.38%yoy in September, reflecting broader disinflationary trend across the region.