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Southeast Asian countries race to raise interest rates to control inflation

Indonesia's inflation rate climbs to 7-year high

Indonesia's inflation rate in September soared to its highest since October 2015 due to higher transport costs following a fuel price hike, according to Statistics Indonesia.

In September, the headline annual inflation rate rose to 5.95%, up from 4.69% in August.

The annual core inflation rate, which excludes government-controlled prices and volatile food prices, reached 3.21%, compared with 3.04% in August and 3.6% forecast by analysts.

The September inflation was mostly affected by the rise in fuel prices and inflation in the transport sector, said Margo Yuwono, head of Statistics Indonesia.

He warned that it could heat up further in October as a number of regions have not yet increased their transportation fares./.
Malaysia’s inflation on the rise
Malaysia’s inflation rate in August increased to 4.7% year-on-year, mainly due to food and non-alcoholic beverages, according to the Department of Statistics Malaysia (DOSM).

The figure, measured by the consumer price index (CPI), also moved up from 4.4% in July, 3,4% in June, 2,8% in May, and 2,3% in April.

Food and non-alcoholic beverages increased by 7.2% in that period, the department said.

The inflation rate in Malaysia is one of the lowest in the world. The August inflation rate in the eurozone was 9.1%, the US’ was 8.3%, Thailand’s was 7.9%, the Philippines’ was 6.3%, and the Republic of Korea’s was 5.7%, said economic affairs minister Mustapa Mohamed.

The lower inflation rate in Malaysia is due to efforts from the Malaysia government, which has provided the largest-ever subsidy (package) recorded in the history of the country, he explained.

On a month-on-month basis, the inflation rate in August was up 0.2% compared with 0.4% in July./.

Thailand’s central bank raises rates 25bp again

Thailand's central bank raised its key policy rate by another 25 basis points on Wednesday to 1.0% for the second consecutive time this year to curb inflation.

"The overall growth and inflation outlook is consistent with the previous assessment. The committee deems that a gradual policy normalization remains an appropriate course for monetary policy," Piti Disyatat, secretary of the monetary policy committee, told a news conference.

That matched the expectations of economists polled by Reuters. Out of the 25 economists polled, 22 had forecast that the Bank of Thailand would raise the key one-day repurchase rate by 25 basis points.

The central bank had kept the interest rate at a record low of 0.50% since May 2020 but then raised it in August by 0.25% following global price hikes triggered by Russia's invasion of Ukraine.

Although prices have continued to rise further, the Thai central bank is tightening its monetary policy only gradually as the kingdom seeks economic recovery from the COVID-19 pandemic.
Thailand's headline inflation was at 7.86% in August, a 14-year high, speeding up from 7.61% in July. The Ministry of Commerce said Thai inflation had hit its peak and was expected to trend downward in the last quarter of this year.

The ministry forecast this year's inflation rate at 5.5% to 6.5%, while the central bank forecast it at 6.3%, up slightly from the previous forecast of 6.2% in August. The Bank of Thailand forecast average annual inflation to drop to 2.6% in 2023 due largely to the prospect of falling global oil prices and the easing of supply chain disruptions next year.

The Bank of Thailand maintained its forecast for Thai economic growth at 3.3% this year. However, it revised down its growth forecast for next year to 3.8%, from the 4.2% it forecast in August, with exports and tourism playing a key role in boosting the economy.

"I think the BoT realized the pressure of rising inflation, but it's not the time to care much about inflation only," said an analyst at KGI Securities. "The BoT also cares about the economy, which has not yet recovered fully as it was in the pre-COVID era."

The central bank also noted that the Thai economy is recovering after the COVID pandemic. However, private consumption -- including tourism, which accounts for more than 10% of the country's GDP -- is still on the mend and needs some flexibility to continue to recover, while the kingdom will continue to rely a lot on exports.

Philippine central bank hikes interest rate to 4.25 pct to curb inflation

The Philippine central bank on Thursday decided to hike the interest rate on the overnight reverse repurchase facility again by 50 basis points to 4.25 percent to curb "broadening" inflation.

The new interest rate policy will be effective on Friday.

Bangko Sentral ng Pilipinas (BSP) said the Monetary Board also decided to raise the interest rates on the overnight deposit and lending facilities to 3.75 percent and 4.75 percent, respectively.

The BSP's latest baseline forecasts show that average inflation is still projected to breach the upper end of the 2-4 percent target range at 5.6 percent in 2022 and 4.1 percent in 2023. Meanwhile, the forecast for 2024 eases to 3.0 percent.

In deciding to raise the policy rate anew, the BSP noted that "price pressures continue to broaden." "The rise in core inflation indicates emerging demand-side pressures on inflation."

The BSP said the risks to the inflation outlook remain tilted toward the upside until 2023 and broadly balanced in 2024.

"Price pressures may continue to emanate from the potential impact of higher global non-oil prices, pending petitions for further transport fare hikes, the impact of weather disturbances on prices of food items, as well as the sharp increase in the price of sugar," the BSP said.

Meanwhile, the BSP said the impact of a weaker-than-expected global economic recovery continues to be the main downside risk to the outlook.

Given elevated uncertainty and the predominance of upside risks to the inflation environment, the Monetary Board recognized the need for follow-through action to anchor inflation expectations and prevent price pressures from becoming further entrenched.

The BSP urges the government to implement timely non-monetary interventions to mitigate the impact of persistent supply-side pressures on food and other commodity prices.

Vietnam central banks of countries decided to raise interest rates 262 times

Deputy Governor of the State Bank of Vietnam Doan Thai Son said that in the past nine months, the world economy had many fluctuations, especially commodity prices as well as inflation in many countries increased significantly highly. Moreover, in recent times, the US Federal Reserve (FED) has continuously raised interest rates to combat inflation.

In that context, in order to cope with inflation and reduce external impacts, central banks of various countries have sharply increased their operating interest rates. Since the beginning of 2022, central banks of countries decided to raise interest rates 262 times. The fight against inflation around the world is taking place very fiercely and the Central Banks of countries are very determined to carry out this task.

In Vietnam, the Government's overarching goal is to administer tools to contribute to controlling inflation, stabilizing the macro-economy as well as supporting economic recovery, especially stabilizing markets to ensure the safety of the operations of credit institutions. Over the past time, the management of the State Bank has also followed closely towards this goal. In the first eight months of 2022, the State Bank of Vietnam will keep the operating interest rates unchanged.

In September, the most recent adjustment of the FED, the State Bank increased some ceiling interest rates on deposits for commercial banks with the aim to control inflation, stabilize the macro-economy and ensure the maintenance of positive real interest rates for deposit rates in order to harmonize the interests of participants in the money market.

At the same time, this decision aims to create good conditions for commercial banks to continue to attract deposits and have financial sources for lending, supporting the economy in the coming time. After the State Bank of Vietnam (SBV) increased the operating interest rate to 1 percent, many commercial banks simultaneously increased deposit rates, making many people fret that this will mean an increase in lending rates.

SBV Deputy Governor Doan Thai Son stated that when adjusting this interest rate, SBV has also taken this into account. Therefore, in addition to the adjustment of ceiling interest rate, the State Bank increased the operating interest rate and the deposit rate ceiling, while keeping the lending rate ceiling unchanged. This shows that the SBV's management has aimed at stabilizing lending interest rates. Simultaneously, the SBV also mobilized credit institutions to continue reviewing to reduce operating costs and stabilize lending interest rates to support people and businesses in the coming time.

Also at the press conference, talking about the GDP growth scenario in 2023, Deputy Minister of Planning and Investment Tran Quoc Phuong said that in 2022, the GDP growth rate for the whole year is expected to be about 8 percent. According to him, the country’s economy in 2023 will face more difficulties because the global economy sees inflation pressures persist as growth slows, current Russia-Ukraine conflict continues leading to concerns about energy security, food security, and supply of goods besides the impact of non-traditional risk issues such as storms, floods, epidemics.

Given the above circumstances, the Ministry of Planning and Investment reported to the Government to choose a growth scenario of about 6.5 percent in 2023.

Source: Reuters, Nikkei, VNS, News Xinhuanet