Archive

Korea Holds at 2.50%: Stability First

• The BoK held at 2.50%, as expected. Housing is overheating, and Won weakness above 1,400 constrains the scope for near-term cuts despite weak growth.​
• Four of six board members support further easing. November's decision hinges on trade talks, real estate trends, and exchange rate stability.​
• Semiconductor exports surge 22% but US tariffs weigh on outlook. The GDP growth forecast is unchanged at 0.9% for 2025, the slowest since 2020.​

UK CPI Trips Into The Fall

• UK inflation’s march higher ended early as expectations tripped over a drop in airfares to slow slightly in September, ahead of slightly falling back through the Fall seasonal.
• Weakness elsewhere cut the annualised median rate below 2% for the first time since March. That is likely to be a small soft spot relative to the worrying cumulative upside.
• Our forecasts remain close to or below the consensus until June, after other forecasts rose in last month’s survey. We still see wages stoking an excessive underlying trend.

By Philip Rush

Indonesia Pauses Easing on FX Pressures

• BI held rates at 4.75%, surprising consensus expectations of a 25bp cut. The pause addresses rupiah stability concerns amid USD5.26bn capital outflows.
• Inflation is benign at 2.65% (core 2.19%) within the target range. Enhanced macroprudential policy is complementing easing with credit growth incentives.
• Further cuts are likely as the Fed eases, depending on rupiah stability, credit transmission effectiveness, and fiscal-monetary policy coordination.

Credit Cockroaches Incubating

• Write-downs at two regional banks follow the cockroaches of First Brands and Tricolor bankruptcies, and should not be dismissed as isolated idiosyncratic events.
• Overly accommodative monetary conditions are stimulating markets to incubate cockroach eggs that may spawn as private credit malinvestment in the next recession.
• It is too early for these eggs to hatch, aided by the warm support of further Fed rate cuts. So, risk assets will probably keep on rising in the void of economic data releases.

By Philip Rush