The US Federal Reserve’s crucial two-day monetary policy meeting begins on December 15, and expectations are high that the central bank will raise interest rates.
Talking on the expectations and impact of the Fed rate hikes on other markets, Adrian Mowat, chief Asian and emerging market strategist, JP Morgan, says if Fed hikes then one could perhaps see some increases in Mexico and South Africa but he does not expect Asian economies to increase rates. If fact, he expects further easing in Chinese monetary policy. Rates are already at record low in Korea and Taiwan. In fact, at some point he thinks India and Indonesia have the potential to reduce real rates by cutting but it is likely that they will wait to see capital flows if any on Fed move, says Mowat.
Giving his views on the trajectory for oil, Mowat says, oil prices had stayed around USD 110 per barrel level for around 3 years and so people had made decisions and lend money often with prudent oil price forecast but they didn’t forecast oil to decline drastically. “I think there is a concentration in the energy space rather than the problem with corporate lending,” says Mowat.
However, he thinks the situation in Asia is much better and one needs to give credit to Malaysians for getting the fuel subsidies and also for introducing GST. We have also seen India getting fuel subsidy, which reflects well on Asia, says Mowat adding that broadly in emerging markets, it may not be good news because these are definitely signs of stress.