Central banks in South Korea, Singapore and Taiwan will probably start to tighten monetary policy early next year as economies in Asia show signs of picking up, Barclays Capital Inc said.
“Growth dynamics in Korea are improving,” Barclays economists Leong Wai Ho (梁偉豪) and Matthew Huang said in a note to clients. “We now believe that the normalization of rates will begin in early 2010, as early as January.”
Policy makers in Asia are signaling they may need to raise borrowing costs as the region’s economies emerge from the worst global recession since the 1930s.
“We see deflationary pressures easing in the coming months,” in Singapore, Leong and Huang said. “Given that there is significant slack in the economy and no overheating pressures, the policy stance is unlikely to be tightened until next April.”
Barclays said Taiwan’s relations with China are on track.
“It is clear the economic-integration dynamic with China remains intact, setting the stage for more capital inflows into equities and a significant reduction in the cost of doing business by early 2010,” the Barclays economists said. “Meanwhile, deflationary pressures are subsiding.”
The Bank of Korea is expected to raise rates twice in the first quarter next year, followed by two more increases in the third quarter, Barclays forecast.
Singapore’s central bank is likely to maintain a “neutral stance” at its October monetary policy meeting, while Taiwan’s central bank isn’t likely to raise rates before the second quarter of 2010, it said.
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