The United States Federal Reserve last week kept its key policy rate unchanged within a range of 0.25%–0.50%, but hinted at an increase at its next meeting in December while waiting for “further evidence.” The Federal Reserve also noted that while inflation has been below its target, it has risen somewhat this year, and that job gains have also been solid.

To read the full report, data and graphs go to http://asianbondsonline.adb.org/newsletters/abowdh20161107.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

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News Highlights - Week of 31 October - 4 November 2016

The United States Federal Reserve last week kept its key policy rate unchanged within a range of 0.25%–0.50%, but hinted at an increase at its next meeting in December while waiting for “further evidence.” The Federal Reserve also noted that while inflation has been below its target, it has risen somewhat this year, and that job gains have also been solid.

*     At its monetary policy meeting on 31 October–1 November, the Bank of Japan announced that it would continue qualitative and quantitative monetary easing. The Bank of Japan stated that while the domestic economy is recovering moderately, exports and production remain weak. Moreover, inflation is expected to approach 2.0% in the second half of fiscal year 2018.

*     Consumer price inflation rose in October in Indonesia to 3.3% year-on-year (y-o-y), in the Republic of Korea to 1.3% y-o-y, and in Thailand to 0.3% y-o-y. In the Philippines, headline inflation remained unchanged at 2.3% y-o-y in October.

*     The Producer Price Index for manufacturing in the Philippines fell 3.8% y-o-y in September, a slower pace of decline compared to the 4.6% y-o-y drop in August.

*     The People’s Republic of China’s Purchasing Managers Index for the manufacturing sector climbed to 51.2 in September from 50.4 in August. The nonmanufacturing PMI also rose to 54.0 from 53.7. Singapore’s manufacturing Purchasing Managers Index recorded a reading of 50.0 in October, slightly moderating from its September reading of 50.1. (A reading above 50.0 generally indicates expansion.)

*     The Republic of Korea’s merchandise exports and imports fell 3.2% y-o-y and 5.4% y-o-y, respectively, in October, following decreases of 5.9% y-o-y and 1.7% y-o-y in September. In Malaysia, merchandise exports fell 3.0% y-o-y in September to MYR68.0 billion. Imports also decreased 0.1% y-o-y in July to MYR60.5 billion. Malaysia posted a MYR7.6 billion surplus in September. Thailand’s merchandise exports rose 3.5% y-o-y to USD19.3 billion in September, up from a 2.7% y-o-y increase in August. Merchandise imports rose 1.7% y-o-y in September to USD15.6 billion after contracting 0.1% y-o-y in August.

*     The Republic of Korea’s current account surplus widened to USD8.3 billion in September from USD5.3 billion in August, led by a monthly increase in the merchandise trade surplus. In Thailand, the current account surplus remained high at USD2.9 billion in September, despite declining from USD3.8 billion in August, mainly due to tourism receipts and a low level of imports relative to exports.

*     Yields fell for most tenors in in Hong Kong, China; the Republic of Korea; Singapore and in Thailand, following US yields, where yields fell except tenors less than one year due to safe haven demand over jitters in the US election.  Yields rose for most tenors in Indonesia due to a spike in inflation in October. In other markets, yields were mixed. The 2-year versus 10-year yield spread fell in the PRC and Philippine but rose in all other markets.

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