The United States Federal Reserve last week decided to leave the key policy rate unchanged at its Federal Open Market Committee meeting on 20–21 September. The committee said that while the

To read the full report, data and graphs go to http://asianbondsonline.adb.org/newsletters/abowdh20160926.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

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News Highlights - Week of 19 - 23 September 2016

The United States Federal Reserve last week decided to leave the key policy rate unchanged at its Federal Open Market Committee meeting on 20–21 September. The committee said that while the domestic economy has firmed enough to consider raising interest rates, it had decided to wait for additional economic data to ensure that another rate increase is warranted. Federal Reserve Chair Janet Yellen said that she expects a rate increase in December if the job market continues to strengthen and no major risks arise. At its monetary policy meeting on 20–21 September, the Bank of Japan introduced a new framework known as “quantitative and qualitative monetary easing with yield curve control” to strengthen its monetary easing program.

*     In its meeting held on 21–22 September, Bank Indonesia’s Board of Governors decided to cut the 7-day reverse repo rate by 25 basis points to 5.00%. Also, both the deposit facility rate (4.25%) and the lending facility rate (5.75%) were reduced by 25 basis points. Stable domestic macroeconomic conditions provided space for the central bank to ease its monetary policy. The Monetary Board of the Bangko Sentral ng Pilipinas decided during its 22 September meeting to keep the interest rate on the overnight reverse repurchase facility at 3.00%. The Philippine central bank also kept interest rates on the overnight deposit and lending facilities unchanged and the reserve requirement ratios steady.

*     Hong Kong, China’s consumer prices rose 4.3% year-on-year (y-o-y) in August, up from 2.3% y-o-y in July.  The rise in inflation was due to a low base effect resulting from the government’s subsidy of housing rentals in August 2015. In Malaysia, consumer price inflation inched up to 1.5% y-o-y in August from 1.1% y-o-y in July. Singapore remained in deflation for the 22nd consecutive month as consumer prices fell 0.3% y-o-y in August after dropping 0.7% y-o-y in July.

*     In the Republic of Korea, the Producer Price Index fell 1.7% y-o-y in August, compared to a 2.5% y-o-y drop in July, according to the Bank of Korea. In the Philippines, the General Wholesale Price Index rose 0.2% y-o-y in July, a slower pace of increase than a 0.3% y-o-y hike in June, according to the Philippine Statistics Authority.

*     Japan’s exports fell 9.6% y-o-y to JPY5.32 trillion in August and imports declined 17.3% y-o-y to JPY5.33 trillion. A trade deficit of JPY18.7 billion was recorded in August.

*     S&P Global Ratings announced on 21 September that it has affirmed its long-term and short-term sovereign credit ratings on the Philippines at BBB and A–2, respectively, with a stable outlook for both. Also last week, Fitch Ratings affirmed Singapore’s long-term foreign- and local-currency issuer default ratings at AAA with a stable outlook, while the short-term foreign- and local-currency issuer default ratings were affirmed at F1+.

*     Local currency government bond yields were mostly down in most emerging East Asian markets after the Federal Reserve refrained from raising interest rate in its meeting last week.  The only exceptions were the People’s Republic of China (PRC) and the Philippines were yield movements were mixed. The spread between the 2- and 10-year yields rose for most emerging East Asian markets except for the PRC, Indonesia, Malaysia, and the Philippines where spreads narrowed.

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