Central banks across Asia are predicted to exercise caution when considering monetary policy easing, given the strength of the US dollar and potential tariffs imposed by the Trump administration, claims Goldman Sachs Group Inc.
Andrew Tilton, the company’s chief Asia Pacific economist, anticipates that the Bank of Korea will refrain from another interest rate reduction this week. Meanwhile, Indonesian officials have warned that US political events may limit their scope to reduce borrowing costs.
Tilton forecasted a slow pace of cuts due to the looming threat of tariffs and the near multi-decade high of the US dollar, asserting that exchange rate stability is vital for Asian central banks.
The prospective introduction of 60% tariffs on China as signaled by Donald Trump, along with cabinet appointees perceived as China-averse, suggest a confrontational approach under the new administration.
Moreover, the economist also mentioned that Beijing may aim to keep the renminbi stable for the time being but might weaken it in the first half of next year if tariffs are put in place, forecasting a weakening of China’s yuan to around 7.50 per dollar.
