Rate Hikes Today in Taiwan, Hong Kong, Macau, Vietnam, Indonesia and the Philippines

September 22, 2022

The discount rate at the Central Bank of the Republic of China (Taiwan) has been raised 12.5 basis points to 1.625%. That increase follows two earlier hikes this year totaling 37.5 basis points. Inflation slipped in August to 2.66% but is still above target. Growth remains positive.

A bigger full percentage point hike of the State Bank of Vietnam’s refi rate to 5.0% makes up for lost time. It was the first increase since 2022. When the pandemic surfaced, the rate was cut in three moves during 2020 from 6% to 4%, so only half of that relief has been reversed.

Hong Kong pegs its currency to the U.S. dollar, and Macau is constrained to move in tandem to the Hong Kong dollar. Both monetary policies are consequently subordinated to exchange rate objectives. In practicality, that means when the U.S. federal funds rate was lifted 75 basis points on Wednesday, similar increases to 3.5% became necessary at the Macau Monetary Authority and the Hong Kong Monetary Authority.

Bank Indonesia’s policy interest rate was increased today by 50 basis points to 4.25%. That’s only the second increase of 2022. August saw a 25-bp hike, and analysts thought today’s increase would be by that smaller amount. The new rate level remains below its pre-pandemic 5.0%. CPI inflation of 4.7% last month was a bit lower than in July but above the 2-4% target range.

The Filipino central bank interest rate was likewise hiked 50 basis points today also to 4.25%. Such had bottomed in 2020 at just 2.00%, but today’s tightening was the fifth rate since May. Not only is inflation above target, but central bank officials additionally worry about peso depreciation and observe that inflation appears to be broadening into more items. They also observe rising expected inflation.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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