Asia markets mixed as Bank of Korea holds again; Hong Kong stocks at two-month low


Bank of Korea holds interest rate for third consecutive time

The Bank of Korea held its benchmark interest rate for the third consecutive time at 3.50% on Thursday.

The decision was in line with a consensus forecast by economists surveyed by Reuters that expected the central bank to pause.

The central bank governor earlier this month told CNBC that it was ‘premature’ to be discussing a rate cut, citing inflation rates in the nation that are still above the Bank of Korea’s target of 2%.

South Korea is slated to release its consumer price index for May next Friday.

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Bank of Korea expected to start cutting rates early next year, Deutsche Bank says

The Bank of Korea is expected to start cutting its benchmark interest rate early next year, Deutsche Bank’s head of APAC Economic Research Juliana Lee said.

Lee added that she expects the central bank’s policy pivot to come in tandem with the U.S. Federal Reserve.

“There are some signs that it’s (exports) have hit the bottom in terms of contraction, but in terms of the rebound, we’re not expecting until the fourth quarter, hence why we have a more bearish view” for growth than the central bank, Lee told CNBC’s “Squawk Box Asia.”

Lee added that she expects the South Korean won to remain widely unchanged until the central bank starts cutting rates.

— Jihye Lee

Indonesia expected to hold rates for a third time

Indonesia’s central bank is expected to hold its 7-day reverse repo rate at 5.75%, according to economists polled by Reuters.

The economists also forecast the central bank to hold its deposit facility rate at 5.00% and its lending facility rate at 6.50% as well.

The move would mark a third consecutive pause for Bank Indonesia, as the nation marked an inflation rate of more than 4% in April. The nation releases its inflation rate for May next month.

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South Korea’s producer price index rose 1.6% in April

South Korea’s producer price index rose 1.6% year on year in April, lower than the 3.3% rise seen in the previous month.

Government data showed that month-on-month, the nation’s producer price index fell by 0.1% after seeing growth of 0.1% in March.

The PPI is a measure of the change in prices that domestic producers receive for their goods and services.

The South Korean won weakened 0.11% in Thursday’s morning to 1,319.66 against the U.S. dollar.

— Jihye Lee

Fed officials are uncertain on whether more rate hikes are needed, minutes show

The Fed minutes showed “uncertainty” from participants about whether to increase rates for an 11th time at its June meeting.

There appeared to be two camps in the Fed now, according to the minutes. One group that contained “some” members judged that progress in reducing inflation was “unacceptably slow” and would necessitate further hikes. The other, backed by “several” FOMC members, saw slowing economic growth in which “further policy firming after this meeting may not be necessary.”

The minutes do not identify individual members nor do they quantify “some” or “several” with specific numbers. However, in Fed parlance, “some” is thought to be more than “several.”

Bottom line, the minutes showed the Fed would be closely watching the incoming data to decide whether to hike rates again on June 14.

— Jeff Cox, John Melloy

Correction: In Fed parlance, “some” is thought to be more than “several.” An earlier version misstated the difference.

Fed’s Waller stresses ‘flexibility’ for June rate decision

Addressing a three-pronged question facing U.S. central bankers, Federal Reserve Governor Christopher Waller said it’s just too soon to tell which choice is correct. Data in the coming weeks before the June 13-14 meeting will determine which is the proper path, he said.

While Waller insisted the Fed will need to “maintain flexibility” on whether it should hike, pause or skip June with an inclination to increase rates in July, he did express doubt that the Fed has gone as far as it needs in the fight against inflation.

“I do not expect the data coming in over the next couple of months will make it clear that we have reached the terminal rate,” Waller said in prepared remarks for a speech in Santa Barbara, Calif.

“And I do not support stopping rate hikes unless we get clear evidence that inflation is moving down towards our 2% objective. But whether we should hike or skip at the June meeting will depend on how the data come in over the next three weeks,” he added.

— Jeff Cox

House Speaker McCarthy reiterates confidence in averting a default

House Speaker Kevin McCarthy reiterated that negotiators should reach a resolution on the debt ceiling even as lawmakers struggle to agree on baseline spending.

“We’re not going to default,” he said during a press conference Wednesday. “We’re going to solve this problem. I will stay with it until we can get it done. But let’s be honest about this. We had to spend less than we spent last year. It is not my fault that the Democrats cannot give up on their spending.”

— Samantha Subin, Sarah Min

Negotiators reconvening Wednesday morning

Negotiators for both sides of the debt ceiling talks were expected to meet again on Wednesday morning, Reuters reported, citing a source familiar.

Stocks fell on Tuesday after negotiators for President Joe Biden and House Speaker Kevin McCarthy appeared to not make significant progress in talks that day.

It could take a week to write any deal and pass it through Congress, the Reuters report stated, raising the stakes to reach an agreement in the next couple days ahead of a June 1 deadline for default from the Treasury.

— John Melloy