FILE PHOTO: The Federal Reserve building stands in Washington April 3, 2012. REUTERS/Joshua Roberts/File Photo
KUALA LUMPUR: Central banks in the Asia-Pacific region are unlikely to implement aggressive rate cuts due to relatively low interest rates compared to the US, as well as domestic factors such as high housing prices and elevated debt levels.
This is according to a report S&P Global Ratings published today, titled, "Economic Outlook Asia-Pacific Q4 2024: Central Banks To Remain Cautious Despite U.S. Rate Relief."
S&P Global Ratings noted that following the U.S. Federal Reserve's 50 basis points (bps) cut in September, the focus has shifted to central banks in the Asia-Pacific region.
The interest rate differentials with the U.S. are relatively low compared to historical standards, leading these banks to implement only gradual interest rate cuts.
"We have not advanced our forecast for policy rate cuts in Asia compared with our June projections, with the exceptions of China, Indonesia, and the Philippines," said S&P Global Ratings Asia-Pacific chief economist Louis Kuijs.
Meanwhile, S&P Global Ratings has reduced its 2024 GDP growth projection to 4.6%, from 4.8%, to reflect a weak domestic demand outlook.
“We see 4.3% growth in 2025, from 4.6%. China's growth outlook has weakened because of a persistent property downturn and low consumer and business confidence.
Despite this, policymakers are refraining from significant macroeconomic policy easing, especially on the fiscal front, leaving the economy vulnerable to downward pressure on prices and profit margins.
"Growth elsewhere is largely tracking our expectations. We continue to see mostly solid expansion, particularly in the emerging markets of Asia," Kuijs said.
“We anticipate 4.4% GDP growth in Asia-Pacific, this year and next, slightly down from our projection three months ago.”
