Asia week ahead: Indonesia, Philippines, Korea rate calls, key data on China and Japan
The upcoming week in Asia sees crucial interest rate decisions, particularly in the Philippines where the Bangko Sentral ng Pilipinas (BSP) is expected to enact a 25bp hike against a backdrop of rising inflation. Per the full note , while the BSP is tightening its stance due to significant domestic inflation pressures, the Bank Indonesia is likely to hold its rate steady at 5.75%. The central bank's decisions are set against the backdrop of vital macroeconomic data releases from China and Japan, which could further influence market sentiment towards Asia's FX outlook.
What the desk is arguing
The desk anticipates a rate hike from the BSP this week, driven by persistent inflation concerns which have surged due to elevated energy prices and food supply risks exacerbated by El Niño. Per the analysis, strong inflation data for September has fundamentally shifted the balance towards an immediate tightening of monetary policy in the Philippines.
Given the BSP's cautious approach to manage inflation and the projected risk of further price increases, the expectation remains for at least another 25bp hike ahead of year-end. Simultaneously, the steadiness of Bank Indonesia's rates underscores a contrast, as it aims to maintain stability amid no immediate pressure to adjust its policy.
Where it sits in our coverage
Currently, our desk aligns closely with jpmorgan, which expects a target of 1.10 for the PHP/USD by March 2026, with other projections hovering slightly lower. Given a disparity with bofa, which sees a more cautious stance at 1.04, our position tends to emphasize the risks and pressures identified surrounding Philippine inflation versus the steadiness projected in Indonesia.
How other firms see it
A number of firms, including jpmorgan and other regional analysts, share a bullish outlook on the PHP, expecting continued tightening from the BSP. In contrast, bofa provides a counter-narrative, advising caution given the possible headwinds from El Niño and global conditions that might constrict growth.
Watch closely the USD/CNY movements, as fluctuations in China's economic data may indirectly impact sentiment towards other Asian currencies, including the PHP and IDR.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01BSP expected to hike rates by 25bp due to rising inflation pressures.
- 02Bank Indonesia likely to maintain its policy rate at 5.75%.
- 03Potential data releases from China and Japan could influence broader regional sentiment.
- 04Inflationary risks in the Philippines arising from energy and food prices may persist.
Market implications
Traders should remain vigilant around the BSP's decision, especially if inflation data continues to surprise on the upside, potentially leading to further tightening. Additionally, market movements in the USD/CNY could provide insights or caution signals for regional currencies, including the PHP and IDR.
Risks to this view
Should inflation metrics start to stabilize or show signs of easing, it could lead the BSP to reconsider the urgency of increasing rates, reversing current bullish sentiments towards the PHP. Additionally, any unexpected downturns in China's economy might prompt negative ripples across the region, impacting the Philippines as well.
Articles Asia week ahead: Indonesia, Philippines, Korea rate calls, key data on China and Japan Published 03:40 Asia week ahead China Indonesia Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Rate decisions take centre stage, with Bangko Sentral ng Pilipinas expected to raise rates while Bank Indonesia and the Bank of Korea are likely to stand pat. Markets will also closely watch China's GDP and Japan's inflation figures Deepali Bhargava and Lynn Song Asia Research highlights of the week Asia FX Talking: More two-way risk emerging in USD/CNY Energy prices lift China’s inflation gauges in September China’s export engine continued to hum in September MAS holds rates steady, but we are not convinced the tightening cycle is over AI tailwinds and inflation risks shape Asia’s outlook China steps up policy support amid rising uncertainty US midterm elections: 3 scenarios for markets Indonesia: Bank Indonesia expected to hold rates We expect Bank Indonesia to leave the policy rate unchanged at 5.75% on Wednesday given recent exchange-rate stability. Although improving sentiment has eased near-term pressure on policymakers to hike, the underlying balance-of-payments picture hasn’t improved materially.
At the same time, upside risks to inflation from higher fuel prices and a severe El Niño could add to domestic price pressures. We therefore still expect one more 25bp rate hike before year-end. Philippines: BSP expected to hike rates by 25bp We maintain our call for Bangko Sentral ng Pilipinas to hike rates by 25bp on Thursday.
Strong September inflation shifted the balance in favour of an earlier October hike. The outlook remains skewed to the upside amid uncertainty over El Niño-related food supply disruptions, elevated energy prices, PHP weakness, and potential second-round effects from higher wages and food costs. BSP is likely to err on the side of caution and maintain a tightening bias to tame inflation expectations until it’s confident prices are on a path back to target.
Korea: BoK expected to hold rates We expect the Bank of Korea to keep its policy rate unchanged at 3.0% on Thursday. However, the pause is unlikely to mark the end of the tightening cycle. Inflation remains above target and economic growth is relatively resilient.
The market will focus on the BoK’s updated outlook and guidance on whether it will hike rates again before year-end. China: Third quarter GDP and activity data in focus China has a busy week ahead, starting with key data releases on Monday. The highlight will be China’s third-quarter GDP.
We look for growth of around 4.4% year-on-year. We’ll also get September domestic activity data. We expect retail sales and industrial production to recover slightly to 0.6% and 5.5%, respectively.
But fixed asset investment is expected to continue contracting to -7.5% YoY ytd. The 70-city property price data for September will also be released. We’ll be watching whether price stabilisation in tier-1 cities continues and spreads further.
On Tuesday, the loan prime rates will be announced. We expect no change once again, with 1- and 5-year LPR unchanged at 3.0% and 3.5%, respectively. Japan: Trade and inflation data in focus Japan releases data on services activity, trade and inflation.
Market consensus expects the tertiary industry index to decline 0.4% month-on-month in August. September export growth is forecast to edge up to 20.1% YoY, while imports slow to 20.0% YoY, narrowing the trade deficit sharply to JPY111bn from a revised JPY1,112bn in August. Headline and core CPI are both expected to accelerate to 2.1% YoY.
A firm inflation reading would support expectations for further Bank of Japan policy normalisation. Key events in Asia next week Philippines Korea Japan Indonesia China 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 Indonesia: Bank Indonesia expected to hold rates Philippines: BSP expected to hike rates by 25bp Korea: BoK expected to hold rates China: Third quarter GDP and activity data in focus Japan: Trade and inflation data in focus
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