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Central bank meetings

Union Budget presentation on 1-Feb and Reserve Bank of India rate decision on 6-Feb: The central government will table the Union Budget for FY27 on Sunday, 1 Feb. We expect the FY26 deficit target to be maintained at -4.4% of GDP, with the nominal anchor shifting to the debt to GDP ratio FY27 onwards, aligning with a deficit goal (read India’s Budget to align with strategic objectives). The RBI monetary policy committee will decide on rates on 6-February. The MPC lowered rates in December 2025, along our expectations, but is expected to refrain from cutting rates further in February. Growth impulse has been firm despite trade tensions, while inflation is off lows. The rupee has continued to be under pressure, depreciating to successive fresh lows. Deposit mobilisation has already been a challenge. Moreover, lowering rates further could spur further repatriation of rate-sensitive portfolio flows. Against this backdrop, the RBI MPC is expected to vote for a pause, while the central bank undertakes direct measures to tackle liquidity, bond stability and currency-related risks. We expect bond purchases to continue this quarter and in Apr-Jun26. 

European Central Bank (5 Feb): The ECB Governing Council is likely to signal that it remains “in a good place” with contained inflationary pressures, and a stable growth outlook despite troubling geopolitical developments. Policymakers are likely to turn uneasy if the EUR/USD remains above 1.20 for an extended period, hurting competitiveness and complicating the inflation outlook. A policy response to influence the currency is not the cards, with verbal intervention likely to be the first line of defence. For now, the ECB is expected to exhibit limited urgency to move in either direction.

Forthcoming data releases

South Korea: January inflation is expected to ease to 2.0% y/y from 2.3% in the previous month, partly reflecting base effects related to the Lunar New Year. Demand-side inflation remains subdued amid weak consumption and a soft labor market. Supply-side inflation is also contained, supported by low oil prices and a stabilizing KRW. The Bank of Korea has clearly signaled the end of its rate-cut cycle. Low inflation suggests there is no urgency for the BOK to shift from rate cuts to rate hikes. We therefore maintain our forecast that the BOK will keep the base rate unchanged at 2.50% throughout this year.

Taiwan: January inflation is expected to ease to 1.2% yoy from 1.3% in the previous month, largely due to base effects related to the Chinese New Year. Both demand- and supply-side price pressures remain subdued, reflecting stable labor market conditions, a weak property sector, and low international oil prices. With inflation staying below the central bank’s 1.5–2.0% comfort zone, there is no pressure for a shift toward rate hikes. We therefore maintain our forecast that the central bank will keep the policy rate at 2.00% throughout this year. As economic growth continues to outperform expectations, the central bank is likely to gradually unwind its liquidity support measures via open market operations, which were introduced to cushion the economy against the impact of reciprocal tariffs in 2H25.

Thailand: We expect Thailand’s headline inflation to remain muted in early 2026, registering at -0.1% yoy in January. The lack of overall prices pressures was likely due to the continued decline in oil prices in yoy terms, and subdued demand-side impulses, as reflected in low core inflation. However, raw food inflation likely remained positive for the second consecutive month, stoked by the continuing impact from weather-related damages.

Vietnam: Vietnam’s economic data for the first two months of 2026 will likely be volatile due to the different timing of the Tet holidays compared to last year. We expect a sustained acceleration of goods exports growth to 26.3% yoy in January, as it benefitted from robust external demand for electronics shipments amid a low base effect. Retail sales growth likely started the year on a resilient note due to continued healthy labour market conditions, and ongoing tourism strength, with headline inflation pulling back to 3.0% yoy amid a high base effect.

Hong Kong SAR: Retail sales growth is expected to rise from 6.5% yoy in November to 7.0% in December, supported by increased visitor arrivals. Although local resident departures remain elevated, mainland visitor arrivals reached 108k per day, up 8% yoy. Hotel occupancy rates exceeded 90% during the Christmas long weekend. Meanwhile, the smaller declines in consumer prices for clothing, footwear, and durable goods also signal improved consumption sentiment during the festive month.

Indonesia: Base effects will be adverse in 1Q26 as stimulus measures in the corresponding period year ago led the quarter’s inflation to slow to 0.6% yoy. Accordingly, our forecast is for the headline to accelerate to 3.8% yoy in Jan26. While the central bank will retain its dovish language, guidance will be cautious in midst of firm inflation, supported growth momentum, volatile equities and a weaker rupiah, backing a rate pause in February. 4Q GDP growth might wrap up the year on a slightly firmer note at 5.1% yoy, taking annual 2025 growth to our forecast at 5%. Confidence indices improved late last year, helped by higher public sector spending, welfare measures and festive demand, which is likely to also have reflected in better consumption. Add to this, trade performance was also firm as a pullback in exports to the US was compensated by better rest-of-the-world (ex US) shipments. Market-driven volatility, however, persisted with the currency maintaining a depreciating bias and bond yield off lows in 4Q25.

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