Commentary: India, Indonesia and South Korea Central Banks May Soon Lower Interest Rates

By Sonal Varma

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Sonal Varma, chief economist of Asia ex-Japan at Nomura. Photo: Nomura

In Asia, excluding Japan, consumer inflation is expected to stabilize within central bank targets this year. This, along with the anticipated shift in U.S. Federal Reserve policy, should open the door for more Asian central banks to lower policy rates.

The rate-cutting cycle has already begun, led by the Philippines’ central bank. We expect other central banks to follow, including Bank Indonesia in September, and both the Reserve Bank of India and Bank of Korea in October, while most others are likely to stay on hold.

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Consumer inflation in Asia (excluding Japan) is expected to stabilize, allowing central banks to potentially lower policy rates, starting with the Philippines.
A positive growth outlook for Asia ex-Japan is supported by steady domestic demand, tech export upcycle, with GDP forecasted to grow 5% in 2024 and 4.7% in 2025.
India, the Philippines, Indonesia, and Malaysia are expected to be the fastest-growing economies, driven by factors like supply chain relocation and increased AI investment.

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