Asian central banks set to raise interest rates in 2018

Malaysia, Thailand, Taiwan, and Philippines are poised to follow Korea’s recent tightening measures.

Amidst rising inflationary pressures, monetary policy is set to be less accommodative in major Asian economies over the next 12 months as Malaysia, Philippines, Taiwan, Thailand and South Korea raise their benchmark policy interest rates, according to BMI Research.

The Bank of Korea led the pack on the tightening path as it hiked interest rate in November 2017. BMI expects BoK to lift the interest rate to a modest 1.75% in 2018 amidst stable economic conditions and controlled inflation.

Malaysia’s Bank Negara Malaysia is similarly expected to gradually hike its interest rate to 3.25% in 2018 amidst strong economic growth thanks to sustained demand in electronics and improvements in oil prices.

Thailand is also projected to slowly hike its interest rate to 1.75% as inflationary pressures increase in the following months as households move to increase their borrowing.

Taiwan is on similar stable footing that it is forecasted to slightly raise its interest rate to 1.5% in 2018 thanks to robust export orders that positions its economy on a gradual rise.

The Philippines’ Bangko Sentral ng Pilipinas is expected to raise its interest rate to an estimated 3.5% in 2018 as strong money supply growth and higher commodity prices continue to pull inflation upward.

“With the peso already one of the worst performing currencies in the region and the US Federal Reserve set to continue on its rate hiking cycle, the central bank is therefore likely to tighten monetary policy in an effort to safeguard macroeconomic stability,” BMI adds.