Asian central banks keep holding rates as the Fed hikes

Asian central banks have not blinked since the Federal Reserve raised US rates for the third time in six months last week.

New Zealand 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 move in March, kept them unchanged this time.

Unlike in past Fed tightening cycles, Asia is much more reliant on China than on the US.

“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,” Neumann noted.

In 2016, US trade with 10 top Asian partners rose by roughly 25 percent from levels before the 200809 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 US’ trade with those nine countries is about half as much.

A key reason for why an emerging Asia previously hiked when the Fed did was due to competition over funding.