Asian central banks have not blinked since the Federal Reserve raised U.S. rates for the third time in six months last week. New Zealand, Taiwan, and the Philippines are all expected to hold rates on Thursday. Indonesia and Japan stood pat last week, as Australia and India did earlier in June. China’s central bank, which raised some interest rates after the Fed’s March move, kept them unchanged this time. Unlike in past Fed tightening cycles, Asia is much more reliant on China than on the United States.
“There is a common thread and it is that China, Asia’s economic engine, continues to stutter,” said Frederic Neumann, HSBC’s co-head of Asian economic research in Hong Kong. “We have more central banks on hold or even with an easing bias because China is weighing on demand and the western world isn’t strong enough to compensate for that.”
In 2016, U.S. trade with 10 top Asian partners rose by roughly 25 percent from levels before the 2008-09 global financial crisis. But China’s trade with the other nine grew almost 60 percent in the same period to $1.05 trillion, according to Reuters calculations. The United States’ trade with those nine countries is about half as much.