Bank of Korea holds rates for a third straight time; Asia markets mixed

The Bank of Korea is expected to start cutting its benchmark interest rate early next year, Deutsche Bank’s head of APAC Economic Research Juliana Lee said.

Lee added that he expects the central bank’s policy pivot to come at the same time as the US Federal Reserve.

“There are some signs that it (exports) has hit bottom in terms of contraction, but in terms of rebound, we don’t expect until the fourth quarter, so we have a more bearish outlook” for growth than the central bank, Lee told CNBC’s “Squawk Box Asia.”

Lee added that he expects the South Korean won to remain broadly unchanged until the central bank starts cutting rates.

— Jihye Lee

Indonesia’s central bank is expected to hold its 7-day reverse repo rate at 5.75%, according to economists polled by Reuters.

Economists also predicted that the central bank would hold its deposit facility rate at 5.00% and its lending facility rate at 6.50% as well.

The move would mark the third consecutive stop for Bank Indonesia, as the country marked an inflation rate of more than 4% in April. The country released its inflation rate for May next month.

South Korea’s producer price index rose 1.6% year-on-year in April, lower than the 3.3% increase seen the previous month.

Government data showed month-on-month, the country’s producer price index fell 0.1% after seeing growth of 0.1% in March.

The PPI is a measure of the change in prices received by domestic producers for their goods and services.

The South Korean won weakened 0.11% on Thursday morning to 1,319.66 against the US dollar.

— Jihye Lee

The Fed’s minutes showed “uncertainty” from participants about whether to raise rates for the 11th time at its meeting in June.

There appear to be two camps at the Fed today, according to the minutes. A group containing “several” members judged that progress in reducing inflation was “unacceptably slow” and would require further increases. Another, supported by “some” FOMC members, saw a slowdown in economic growth where “further policy tightening after this meeting may not be necessary.”

The minutes do not refer to individual members nor do they count “some” or “some” with specific numbers. However, in Fed parlance, “some” is thought of as more than “a few.”

Bottom line, the minutes showed the Fed is closely watching incoming data to decide whether to raise rates again on June 14.

— Jeff Cox, John Melloy

Correction: In Fed parlance, “some” is thought of as more than “a few.” An earlier version misstated the difference.

Responding to the three-pronged question facing US central bankers, Federal Reserve Governor Christopher Waller said it was too early to say which option was right. Data in the coming weeks before the June 13-14 meeting will determine which is the right path, he said.

Although Waller insisted the Fed would need to “retain flexibility” in whether it should hike, pause or skip June’s inclination to raise rates in July, he expressed skepticism that the Fed has come as far as it needs to in the fight against inflation.

“I don’t expect the data coming in the next few months to make it clear that we’ve reached the terminal rate,” Waller said in prepared remarks for a speech in Santa Barbara, Calif.

“And I don’t support stopping rate hikes unless we get clear evidence that inflation is coming down toward our 2% goal. But whether we should walk or skip the June meeting will depend on how the data in the next three weeks,” He added.

— Jeff Cox

House Speaker Kevin McCarthy reiterated that negotiators must reach a resolution on the debt ceiling even as lawmakers struggle to agree on baseline spending.

“We’re not going to default,” he said in a press conference on Wednesday. “We’re going to solve this problem. I will stay with it until we can get it done. But let’s be honest about this. We had to spend less than we spent last year. It is not my fault that the Democrats cannot give up their spending.”

— Samantha Subin, Sarah Min

Negotiators for both sides of the debt ceiling talks are expected to meet again on Wednesday morning, Reuters reported, citing a familiar source.

Stocks fell on Tuesday after negotiators for President Joe Biden and House Speaker Kevin McCarthy appeared to make no significant progress in the day’s talks.

It could take a week to write any deal and pass it through Congress, the Reuters report said, raising the stakes to reach an agreement in the next few days before a June 1 deadline for a default from the Treasury. .

— John Melloy