Looking For More Rate Cuts in Asia? Don't Hold Your Breath
Indonesia may have surprised with a big currency-denting interest rate cut, but this economist says they won't have company.
Indonesia surprised markets when it decided to cut interest rates 50 basis points, and Asian currencies, especially the rupiah, felt the effects. With the move coming little more than a week after Australia cut rates, investors are wondering who might be next in the region.
Probably no one, says Erik Lueth, senior regional economist for RBS. "Broadly speaking, for the region I think the story's pretty much the same as in Korea," which today left interest rates unchanged, he told CNBC. Korea is "a bit on the knife's edge. We definitely see a slowing in the economy," he says, "but I also think that it's too early to call for cuts because I think there are still inflationary pressures in the economy."
When will the stasis end? "Over the coming quarters, inflation dynamics will look a little bit better, and banks will not cut because of uncertainty," Lueth says. "But we wouldn't be surprised if the next move in rates, let's say late in 2012, would be up rather than down."
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