Central bank meetings

Bank of Thailand (BOT) (Aug 13): Thai fixed income markets are pricing in about two 25bps policy rate cuts in the next three to six months, and we foresee the BOT reducing rates by 25bps to 1.50% in the August meeting. The Monetary Policy Committee remains dovish, stating that monetary policy should remain accommodative to support the economy. This suggests that it is a matter of time before rates are lowered, even if not in August to preserve policy space. Since June’s decision, private consumption, particularly services, consumer confidence, and foreign tourism have weakened, alongside falling credit. There are also political uncertainties. Goods exports, while firm in 1H, will ease in 2H, due to a payback from earlier front-loading and still-high US tariffs. The revised US reciprocal tariff rate on Thai imported goods of 19% marks a sharp rise from 2024’s level, although close to the BOT’s 18% assumption, and lower than 36% threatened on Liberation Day. Threats of punitive sectoral tariffs, such as on semiconductors, are underway, with the uncertainty adding to the challenges. Muted headline inflation that is well below the BOT’s 1-3% target range provides room for looser policy.     

Forthcoming data releases

Japan: The preliminary estimate for 2Q GDP is expected to show growth hovering around 0%. We forecast a modest increase of 0.2% q/q saar, just enough to offset the contraction recorded in 1Q. Export momentum weakened in 2Q, weighed down by declining shipments to the US and continued soft demand from China. Motor vehicle exports dropped notably, reflecting the impact of US automobile tariffs implemented in April. On the domestic front, private consumption remained subdued, with wage growth still trailing inflation and real wages staying in negative territory. The persistence of weak GDP data suggests that the Bank of Japan is unlikely to raise rates in the near term. While the Japan-US trade deal has helped reduce tariff-related uncertainty, the BOJ will likely want to see a more robust wage recovery and stable inflation dynamics before resuming normalization. We maintain our forecast for a 25bps rate hike in 4Q.

Malaysia: Malaysia’s final GDP release for 2Q25 will confirm resilient economic growth. We foresee real GDP growth of 4.5% YoY, unchanged from advance estimates. Growth was mainly supported by a still-robust services sector and firm domestic demand, alongside steady manufacturing expansion, despite brewing external headwinds. In 2H, Malaysia’s trade reliant economy will face downside pressure from a payback in earlier exports front-loading, weaker external demand from still-high US reciprocal tariffs of 19% (although lowered from 24% threatened on Liberation Day), while uncertainty surrounding potential semiconductor levies also present challenges.

Singapore: Singapore’s final GDP figures likely confirmed resilient growth in 2Q25, with the economy avoiding a technical recession, as it was mainly supported by exports front-loading. We expect real GDP to expand by 1.4% QoQ sa, reversing the contraction of 0.5% QoQ sa in 1Q. The economy therefore grew by 4.3% YoY in 2Q, compared to 4.1% YoY in 1Q. Considering firmer-than-expected expansion in 1H, and weaker external demand in 2H, due to still-high US tariffs globally, elevated trade policy uncertainty, and cautious business sentiment, the Ministry of Trade and Industry (MTI) could raise its 2025 growth forecast to a narrower range of 1.5-2.5%, from 0-2%.

India: July inflation is likely to decelerate sharply to a new low for the series at 1.3% yoy from 2.1% yoy month before. As we noted in India: Disinflationary phase and path ahead, much of the moderation in price pressures is food led, followed by ex-gold services. Base effects have also played a dominant hand, reflected in the second month of contraction in food and beverages segment, while sequential momentum rises on seasonal monsoon-related supply vagaries. Core is expected to stay above 4%, lifted by precious metals. As base effects recede in the coming months, headline inflation is expected to return to return to above 4% by early-2026. This alongside optimism on the growth momentum convinced the central bank to maintain a neutral pause this month (Neutral pause, watching liquidity and tariffs). Non-committal policy guidance raised the bar for further rate reductions. Trade numbers, due around mid-week, are expected to reflect the passage of frontloading in exports. Impact of new tariff rates imposed by the US will be apparent towards tail end of the year (first 25% kicked in on 7 Aug and second 25% on Aug 21).

China: Domestic demand is expected to ease as we enter the second half of 2025. Retail sales growth likely fell from 4.8% YoY in June to 4.6%. Consumption sentiment remains subdued, with CPI having fallen for two consecutive months on a MoM basis. Likewise, industrial production is expected to slow from 6.8% YoY to 6.0% amid weak construction demand. Fixed asset investment is also projected to retreat from 2.8% YoY YTD to 2.6%, dragged by property fixed asset investment. Against this backdrop, the PBOC has maintained its moderately loose monetary policy stance, having net injected RMB288bn last month. M2 growth should have accelerated from 8.2% to 8.5%.

Economics Team

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