Morning bid: China is calming down again, Jackson Hole looms

People pass an electronic screen displaying Japan’s Nikkei stock price index in a conference hall in Tokyo, Japan June 14, 2022. REUTERS/Issei Kato

Aug 22 (Reuters) – A look at Jamie McGeever’s day ahead in Asian markets

Business and macro agendas in Asia are remarkably light on Monday, allowing investors to fully look forward to three regional policy decisions from the central bank, and most importantly, Jackson Hole, later in the week.

Federal Reserve Chair Jerome Powell will deliver his keynote address Friday at the Kansas City Fed’s two-day annual economic symposium during its Wyoming retreat. His long-awaited speech on the economic outlook could indicate how high US borrowing costs could become and how long they will have to stay there to stem rising inflation.

Due to pricing in the US interest rate market, the Fed has raised interest rates to a peak of around 3.65% early next year, little changed in the past two weeks. But traders have reduced the amount of rate cuts they expect between March and December next year from 60 bps to 40 basis points.

That said, some Fed officials have recently pointed to the dangers of overly aggressive rate hikes. Will Powell nod to the threat to growth from higher rates, or rely on the more common inflation-destroying rhetoric?

In Asia, monetary policy is much less aggressive. The central banks of China, South Korea and Indonesia are meeting this week and only one, the Bank of Korea, is expected to raise interest rates.

The People’s Bank of China is expected to cut its one-year bond yield by 10 basis points to 3.60% Monday, and its five-year yield by a wider margin, as it fights to support a shaky real estate market and the Covid-ravaged economy. read more

The BOK is expected to raise borrowing costs by 25 basis points to 2.50% on Thursday, while inflation is still above target, and it is a bull’s eye whether Bank Indonesia remains at 3.50% or at a quarter point will rise.

As important as these decisions are, all eyes are on Powell in Jackson Hole on Friday.

Reporting by Jamie McGeever in Orlando, Florida Editing by Deepa Babington

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