Asia week ahead: Indian rate decision and data on Philippines, Indonesia, China
The upcoming week features the Reserve Bank of India's decision on interest rates as a pivotal event, which is likely to see the repo rate held at 5.25%, according to recent analysis. This stance reflects a broader trend of contained core inflation and the potential lingering effects of elevated oil prices on domestic price pressures (per the full note source). Additionally, various macroeconomic indicators from Southeast Asia, including Philippine GDP and Chinese trade data, will shape the regional outlook for domestic currencies against the backdrop of these pivotal central bank decisions.
What the desk is arguing
The Reserve Bank of India is anticipated to maintain its current repo rate amid subdued economic conditions and manageable inflation, as highlighted in the bank's analysis. With June's headline inflation marked at 6.1%, primarily driven by escalated fuel costs, the central bank finds itself with enough breathing room due to core inflation remaining below the target.
Notably, the continuance of a 5.25% rate is largely justified by recent economic conditions, including external pressures from rising oil prices and potential adverse effects from climate patterns such as El Niño. These factors will likely be monitored closely as they present risks to the inflation trajectory, influencing future monetary policy decisions.
Where it sits in our coverage
The prevailing consensus target among firms reflects a balance, with a target of 1.075, placing it between estimated ranges of 1.04 and 1.12. Specifically, firms such as: - jpmorgan: expecting a target of 1.10 for Mar26 - bofa: projecting a lower target of 1.04 for Mar26
The desk's view aligns with jpmorgan's projection at the higher end of the spectrum, suggesting strong support for the Indian rupee if consistent monetary policies persist.
How other firms see it
Aligned firms, primarily focused on ongoing inflation monitoring, lean towards stability in the INR, echoing sentiments shared by jpmorgan. Conversely, bofa presents a more cautious outlook, anticipating challenges that could drive lower targets. Notably, movements in pairs such as INR/USD will likely be sensitive to these decisions, especially as regional dynamics play out.
What the calendar says
As the calendar shows no immediate high-impact events in the next 30 days, traders should remain alert to the coming RBI decision regarding interest rates, which may have implications for market positioning leading into the latter half of the month.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01RBI set to hold rates at 5.25%, indicating cautious but stable monetary policy.
- 02Philippines and Indonesia economic data will provide context for regional risk appetite.
- 03Developments in China’s trade figures will further influence the outlook for Asia-Pacific currencies.
- 04Oil prices and climatic impacts remain critical watchpoints for inflation risks.
Market implications
Watch for the INR's performance against the USD following the RBI's decision, particularly if rates hold steady and inflation remains subdued. A break above or below the 1.075 consensus could shape positioning leading into month-end.
Risks to this view
An unexpected uptick in inflation driven by oil prices or dramatic shifts in governmental fiscal policy could prompt a reconsideration of the RBI's rate stance, potentially undermining current bullish sentiment in the INR.
Articles Asia week ahead: Indian rate decision and data on Philippines, Indonesia, China Published 04:09 Asia week ahead China India Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download India's rate decision is the highlight of the week, though the Reserve Bank of India is expected to keep rates unchanged. Key data releases include Philippine GDP and inflation, Indonesia's second-quarter GDP, China's trade figures, and Taiwan's inflation and trade Deepali Bhargava and Lynn Song Asia Research highlights of the week Bank Indonesia’s leadership change – continuity or shifting priorities? Inflation dynamics strengthen the case for an extended RBA hold China’s Politburo strikes a supportive tone but offers few tangible measures The winners and losers of China’s K-shaped economy India: RBI expected to keep rates unchanged We expect the Reserve Bank of India to keep the repo rate unchanged at 5.25% on Wednesday.
While headline inflation surprised to the upside in June, largely due to higher fuel prices, underlying price pressures remain contained. Core inflation continues to run below the RBI's target, providing policymakers with sufficient room to keep policy rates unchanged while monitoring evolving risks to the inflation outlook. Particularly from elevated oil prices and the potential impact of a severe El Niño event on food prices.
Philippines: GDP and inflation in focus Philippines GDP growth is expected to remain subdued in the second quarter at a 3.5% year-on-year pace, as elevated oil prices and continued political uncertainty keep investment activity muted. On the positive side, government spending should begin to recover after contracting in the second half of 2025, providing some support to domestic demand. Export growth is also expected to strengthen relative to the first quarter, with the Philippines benefiting from deeper integration into the AI supply chain.
However, higher oil and non-oil import prices are likely to weigh on the trade balance, resulting in a smaller net contribution from external demand to overall GDP growth. We expect CPI inflation in July to remain unchanged at 6.4% YoY. Food inflation should ease somewhat, with lower rice prices providing relief after the sharp increase recorded in June.
However, fuel inflation is likely to continue edging higher, driven by increases in retail fuel prices. Services inflation is expected to remain sticky, reflecting persistent underlying price pressures in the sector. Indonesia: Slower 2Q GDP growth expected We expect Indonesian GDP growth to slow sharply to 5.0% YoY in 2Q from 5.6% previously, reflecting a challenging environment for private investment amid weak business confidence.
Growth is also likely to be weighed down by a deterioration in the trade balance, as exports soften while oil imports remain relatively firm, driven by higher oil prices. China: Trade data to highlight export strength China releases its trade data on Friday. We look for exports and imports to remain strong, with 28.1% YoY growth for exports and 33.6% YoY growth for imports, for a trade surplus of $112.6bn.
Trade is expected to continue to be dominated by tech-related categories. Markets might continue to watch for signs of China’s oil imports recovering or further stagnating. Taiwan: Inflation and trade data in focus Taiwan releases its inflation data on Wednesday.
We look for inflation to moderate slightly to 2.4% YoY, which remains above target. Upside surprises might add to pressure for a rate hike in September, while an undershoot might reduce this pressure. Taipei will also release trade data on Thursday.
We are looking for both exports and imports to edge up in July, to 43.6% YoY and 56.4% YoY, respectively, for a trade surplus of $15.2bn. Trade growth is expected to remain strong in the third quarter. Key events in Asia next week Taiwan Philippiness Indonesia India China Asia Pacific Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives.
The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Deepali Bhargava Regional Head of Research, Asia-Pacific Deepali Bhargava joined ING in 2024 and is Head of Research and Chief Economist Asia-Pacific. She has over 19 years of work experience as a macro specialist covering rates, FX and equity markets… Lynn Song Chief Economist, Greater China Lynn Song joined ING in January 2024 as the Chief Economist for Greater China.
Prior to joining ING, he worked at China Construction Bank International, China Merchants Securities (HK), and Haitong… In this article Asia Research highlights of the week India: RBI expected to keep rates unchanged Philippines: GDP and inflation in focus Indonesia: Slower 2Q GDP growth expected China: Trade data to highlight export strength Taiwan: Inflation and trade data in focus
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