Heteronomics Archive

July 14, 2025

Tuning Tariff Impact Estimates

President Trump’s tariff policy seemingly follows a random walk with a drift towards deals. Path dependency raises risks and uncertainty around his volatile whims.
Corporate avoidance measures have spared their customers from most of the pain, but Vietnam’s deal as a template could belatedly bring more of the pain to bear.
We assume most countries stay at 10%. The impact of others rising to 20% may be smaller than the anti-avoidance hit, with the total now worth less than 0.4% to UK GDP.

By Philip Rush

July 09, 2025

BNM trimmed the OPR to 2.75%, a move anticipated by just over half of surveyed economists, reflecting a mildly surprising tilt towards accommodation.
Future rate decisions hinge on tariff negotiations, subsidy rationalisation, and whether subdued core inflation persists within the 1.5%–2.5% comfort band.
With liquidity bolstered by an earlier SRR cut and inflation benign, the MPC retains scope for one further 25 bp reduction should external demand weaken further, but ringgit stability and fiscal adjustments will temper the pace of any additional easing.

May 08, 2025

Bank Negara Malaysia held its official policy rate at 3%, in line with consensus, maintaining a supportive stance amid resilient domestic demand and heightened global trade tensions. The decision reflects concern over downside risks from external uncertainties and weaker global sentiment.
Headline and core inflation remained subdued in Q1 2025, at 1.5% and 1.9% respectively, with the outlook deemed manageable due to easing global cost pressures and limited domestic demand-pull inflation. Inflation risks remain externally driven, linked to commodity markets and trade policies.
The ringgit continues to be influenced by external volatility, though Malaysia’s structural reforms and narrowing interest rate differentials lend support. Future rate decisions will depend on the trajectory of inflation and the balance of risks to growth amid an uncertain global environment.

March 11, 2025

Donald Trump’s abandonment of the US-led international order and efforts to reshape global trade and finance do not bode well for East Asian economies that may find themselves forced by Washington into a Chinese sphere of influence as part of a grand bargain with Beijing.