Central bank meetings

Bank of Thailand (BOT) (17 Dec): Thai fixed income markets are pricing in a 25bps policy interest rate cut to 1.25% during the BOT’s decision in December. This aligns with our expectations for further monetary easing to cushion the subdued economy. The BOT has signalled its commitment to accommodative monetary policy through 2026, and since its previous meeting in October, the Thai economy has continued to face multiple headwinds. Real GDP growth in 3Q25 stepped down to 1.2% yoy, marking the slowest expansion in four years, and underperforming the BOT’s forecast of 1.5% yoy. The slowdown was due to broad-based moderation across the main agriculture, industrial, and services sectors. Goods exports, which grew at their weakest pace in 13 months as of October, face challenges from US tariffs, while private investment has softened amidst economic uncertainties. The floods in Southern Thailand since November have also disrupted agricultural and industrial production. While foreign tourism arrivals and consumer confidence have rebounded from their lows, they remain below the levels from a year ago. Moreover, headline inflation remained below the BOT’s 1-3% inflation target for the ninth consecutive month as of November. Although muted inflation was primarily due to supply-side food and raw food factors, there is room for lower real interest rates to support weak domestic credit conditions.

Bank Indonesia (17 Dec): We expect a pause from BI this week, as policymakers continue to count on policy transmission to ease financial conditions. While the central bank is likely to retain its dovish language, we expect ammunition to be preserved in light of firmer momentum in domestic activity towards late 2025, given stimulus measures, improvement in consumer confidence indices, and higher public spending, even as inflation remains within official goalposts. USDIDR has also maintained an upward bias within the 16600-16750 range, notwithstanding the US Fed’s latest rate reduction. Overall, we expect monetary policy to be aligned with the fiscal’s growth supportive tilt, retaining our call for 75bp more cuts in 2026.

Taiwan’s central bank (18 Dec): Taiwan’s central bank (CBC) is expected to keep the benchmark rate, RRR, and credit control measures unchanged. Following the government’s upward revision of its 2025–2026 GDP growth forecasts to 7.4% and 3.5% respectively, the CBC may also raise its GDP projections at this meeting, reducing the pressure to cut rates to support the economy. With CPI inflation easing to just 1.2% in November, there is similarly little justification for the CBC to hike rates to contain inflationary pressure.

In response to tariff pressures on traditional industries, the CBC has increased liquidity support through open market operations since the September meeting. Money supply (M2) has recovered to 5% yoy, placing it in the upper half of the CBC’s reference range of 2.5–6.5%. Liquidity conditions appear appropriate, providing little reason to adjust the RRR.

The CBC has so far maintained its credit control measures, including the loan-to-value cap and real estate loan concentration limits. Recent data show that property price adjustments remain moderate despite a sharp decline in transactions and construction activity, while real estate loans still account for 36.6% of total bank lending, above the CBC’s comfort zone of 35–36%. As such, the CBC is unlikely to significantly relax its credit control measures at this meeting.

European Central Bank (18 Dec): The European Central Bank (ECB) is expected to leave the deposit facility rate unchanged at 2% this month, on relatively resilient growth and stable inflation outlook. Recent commentary from Governing council members has also validated this view, with ECB Chief Lagarde highlighting the likelihood of an upward revision in growth forecasts. We expect an extended pause in 2026, with a resumption to lower rates contingent on any unexpected growth shocks. If inflation shows signs of a pickup, the narrative might shift from rate cuts to a gradual tightening cycle in latter part of 2026.

Bank of Japan (19 Dec): We maintain our long-standing view that the Bank of Japan will raise the overnight call rate by 25bps to 0.75% at this meeting. Governor Ueda has recently provided clearer signals of such a move, explicitly stating that the BOJ will consider the “pros and cons” of raising rates to 0.75% at the upcoming meeting. The government has also shown tolerance for further tightening, with the prime minister, finance minister and the economic minister emphasizing that specific monetary policy decisions are for the BOJ to determine.

The focus will shift to the BOJ’s guidance on the pace of subsequent rate hikes and the potential terminal level of policy rate. Governor Ueda may continue to adopt a deliberately ambiguous approach—stressing that the timing of future rate hikes will remain data-dependent, and the neutral rate is “at least around 1%.” Sustained wage-driven inflation is not yet assured: labour unions are demanding strong wage increases to offset inflation pressures, but firms face reduced capacity to deliver them amid a tariff environment that is squeezing corporate profits. On the neutral rate, Ueda has reiterated in parliamentary hearings that it can only be estimated within a wide range (1%–2.5%), given that the underlying natural rate is unobservable and sensitive to multiple economic drivers.

People’s Bank of China (20 Dec): The PBOC is expected to cut the 1Y LPR by 10bps to 2.90% this month. The ongoing anti-involution campaign continues to require further easing. While November CPI and PPI have shown relative improvement, the real policy rate remains elevated and stays above levels in major economies such as the US and Japan. This has been restraining investment and credit growth. The external environment also supports a cut. The Federal Reserve has delivered 75bps of easing this quarter, allowing the CNY to strengthen to the 7.05 level. This backdrop gives the PBOC room to proceed with rate cuts while maintaining exchange-rate stability.

Forthcoming data releases

China: China’s domestic demand likely remains sluggish in November. Retail sales growth is projected to soften from 2.9% YoY in October to 2.5%, weighed down by the negative wealth effect from the property sector. Primary-market home sales have fallen by more than 40% YoY in October, highlighting weak household sentiment. Other indicators continue to signal subdued consumption. CPI has shown relative improvement but remains modest.

Industrial production is expected to ease from 4.9% to 4.7%. Likewise, fixed-asset investment should have extended its contraction from –1.7% YoY YTD to around –2.5%, as businesses are curbing excess production and investment to protect profits. Persistently weak inflation and the resulting elevated real interest rates are restraining credit growth.

Japan: November trade and inflation data are due this week. Exports are expected to show a modest rebound of around 5% yoy, supported by the fading impact of reciprocal tariffs, the US tariff rate on Japan being lowered to 15%, and continued strong global semiconductor demand. Meanwhile, CPI inflation is estimated to remain elevated at roughly 3% yoy, as a weak yen raises import costs and domestic wage-price dynamics remain stable. Overall, this week’s trade and inflation data are likely to reinforce expectations of a 25bps rate hike by the Bank of Japan at Friday’s policy meeting.

Malaysia: Malaysia’s goods exports likely sustained their expansion for the fifth consecutive month in November 2025. We expect 12.5% yoy growth, compared to 15.7% yoy in October. This was primarily supported by electrical & electronics (E&E) shipments, which remained aligned with positive regional trends, amidst sustained artificial intelligence (AI)-related external demand, and US tariff exemptions on electronics goods. Malaysia’s diversified export base by destination has also provided cushion this year, at a time when exports to the US are feeling the negative impact of US tariffs.

Singapore: Singapore’s stellar non-oil domestic exports (NODX) growth of 22.2% yoy in October 2025 appears unsustainable in the final two months of the year, and we expect softer NODX reading of -1.0% yoy in November. While resilient artificial intelligence (AI)-related demand boded well for electronics domestic shipments, high and adverse base effects likely weighed on their performance (electronics NODX registered the second highest print of 2024 in November 2024 at 23.1% yoy). Non-electronics domestic exports momentum also likely cooled in November, as the dampening and lagged impact of US tariffs likely fed through, although with some cushion from elevated gold prices. We will continue to monitor front-loading momentum, which is better assessed through non-oil re-exports (NORX).

Hong Kong SAR: Hong Kong’s growth momentum continues to improve. Retail sales are expected to accelerate from 6.9% YoY in October to around 8.0% in November. A resilient stock market and recovering property prices are supporting consumption sentiment through a positive wealth effect, while a falling jobless rate is translating into stronger income growth. Externally, the strengthening RMB is boosting tourists’ spending power.

On the trade front, export growth is likely to remain elevated at around 17.5% in November. While exports to the US continue to decline, trade outside the US is gaining traction. As an international re-export hub, Hong Kong is benefiting from this shift. Imports are also expected to grow by roughly 16.5% amid strengthening domestic demand. Beyond consumer goods, developers may be increasing imports of raw materials in anticipation of next year’s construction activity, as inventories have been falling.

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