Goldman Foresees Earlier Easing By Banks From India To Australia Post-Fed

Central banks across the Asia-Pacific region, spanning from India to Australia, are poised to initiate interest rate reductions earlier than previously anticipated. This adjustment comes in response to the Federal Reserve's hastened easing cycle, a prediction outlined by Goldman Sachs Group Inc. The recent downturn in long-term US rates, coupled with a weaker dollar, along with the expected commencement of Fed rate cuts in early 2024, indicates the likelihood of several Asia-Pacific central banks easing their monetary policies sooner than initially projected.

Goldman Sachs has revised its forecasts, now expecting rate cuts in Indonesia and Taiwan by the second quarter of the upcoming year. Moreover, they anticipate similar measures in India, Australia and New Zealand by the third quarter, a notable shift from their earlier estimation of easing by the conclusion of 2024. However, Goldman anticipates that the rate reductions across the Asia-Pacific region might occur less frequently and with less intensity compared to the projected easing cycle outlined by officials from the Federal Reserve.

The Federal Reserve has shifted its approach, aiming to reverse its previous rate hikes. This strategic change was signaled by Fed Chair Jerome Powell and his colleagues, who unveiled plans for multiple rate reductions slated for the upcoming year. In tandem, Barclays Plc has adjusted its trajectory concerning rate cuts in certain emerging Asia central banks, such as Indonesia and the Philippines, citing the recent alterations in the US economic outlook.

Despite initially expecting most regional central banks to maintain their current stance throughout 2024 due to the Federal Reserve's earlier hawkish stance, Barclays suggests that some central banks in EM Asia, notably the BSP and BI, may align more closely with the Fed's adjustments. These banks could potentially initiate their easing cycles sooner. Nevertheless, Barclays maintains its prediction that the Bank of Thailand and Bank Negara Malaysia will likely uphold their existing policies through 2024, given their historically cautious approach to prior hiking cycles.