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CENTRAL BANK MEETINGS

India: RBI monetary policy committee meeting (7-Oct)

The macro environment has undergone significant changes since the RBI monetary policy committee’s (MPC) August policy meeting, with global oil prices rising past $100bl, and US Fed kickstarting their rate hike cycle. Domestically, core and headline continued to rise, laying the ground for inflation to quicken beyond 5.8-6.0% in the second half as price risks broaden.. Strong 1QFY27 GDP growth meanwhile pointed to the economy’s relative resilience to external shocks.

Besides fuel feeding into food costs, weather has also proved to be disruptive, with indications that the El Niño phenomenon could extend into 2027. International food benchmarks, including the UN Food Price index and the Bloomberg spot agricultural indices, continue to climb. India’s food inflation has become more broad-based, shifting beyond vegetables and pulses to sugar, milk, protein groups, and edible oils. Sub-par weather has contributed to this upmove, besides idiosyncratic factors like swing in production trends (cobweb), diversion for fuel usage etc.

After two years of normal monsoon, cumulative southwest rainfall this year is set to end with rainfall around 12-13% below the long-term average, the most since 2015 and resulting in a slower build-up in reservoir levels.

Global benchmark oil price gauge has averaged ~$93pb in FY27 year-to-date, up 36% yoy vs FY26. Retail pump fuel prices were adjusted in quick succession in May26 and have been left unchanged since then, while other fuel products including CNG, aviation fuel, LPG etc have continued to climb. Add to this, other pockets like telecom, restaurants, business services, transport fares etc have been inching up, reflecting early signs of broadening in price pressures (on sequential basis). A gradual broadening of price pressures is likely to keep headline inflation high and narrow the real rate buffer significantly.

Authorities are also conducting liquidity absorption measures through market operations like VRRR, open market operations and sell-buy FX swaps. This is likely to align the overnight call money rates to the benchmark repo rate, after having fallen sharply due to the surplus in the banking system.  Liquidity and core inflation have historically displayed a modest positive relationship, as per our study. As such, the RBI's inflation mandate has likely reinforced the push to drain excess liquidity.

We expect the RBI MPC to raise the repo rate by 25bp to 5.5%, citing pipeline inflationary pressures. Stance could be changed to withdrawal of accommodation to signal hawkish intent. We expect one more hike within 4Q26, though the odds of additional hikes have risen as oil prices stay stubbornly high and weather remains unfavourable.

FORTHCOMING DATA RELEASES

Malaysia

We expect industrial production to grow by 5.8% yoy in August from 4.7% yoy in July. Strength in export-oriented manufacturing is likely to persist, supported by sustained demand for artificial intelligence-related electronics goods, while mining output may have recovered from its contraction in July.

Taiwan

September trade and inflation data are forthcoming. Export growth is expected to sustain the 40% pace seen in the previous month. The global AI boom is facing rising headwinds from synchronised rate hikes by G3 central banks, higher bond yields, and rising financing costs. That said, there are so far no clear signs of a significant slowdown, based on the high-frequency indicators we track across AI demand, investment, and supply.

CPI is expected to rebound to 2.4% YoY in September, up from 2.0% in August. The earlier arrival of the Mid-Autumn Festival this year may have boosted food and services prices on a YoY basis. The rebound in global energy prices should also have lifted transport costs, including gasoline prices and airfares. While electricity tariffs will remain frozen, the December review implies a possibility of an electricity price hike after the local elections.

Given still-strong economic growth, persistent inflation, and the potential for inflation expectations to rise, we maintain our view that the central bank will raise the policy rate by a modest 12.5bps to 2.125% in December.

Thailand

We expect Thailand’s headline inflation to accelerate to 3.2% yoy in September from 2.5% yoy in August, slightly exceeding the central bank’s 1-3% inflation target. Faster increases in energy and food prices likely pushed overall inflation higher, despite an easing in electricity tariffs starting September. We expect the Bank of Thailand (BOT), which views the rise in inflation as largely supply-driven, to keep its policy rate stable at 1.00% for the remainder of 2026, aiming to support an economy with low and uneven growth.

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