This article first appeared in The Edge Malaysia Weekly on June 10, 2024 - June 16, 2024

All eyes will be on the US Federal Reserve at the Federal Open Market Committee meeting on June 13 (Thursday) on whether it will keep interest rates on hold at 5.25% to 5.5% or make the surprise move of cutting it earlier than expected.

In a June 7 report, UOB Global Economics & Markets Research economist Alvin Liew says: “According to a Bloomberg poll [last Friday], unsurprisingly, the vast majority (78 of 80 [analysts]) expect the Federal Reserve to stay on hold in June, as do we. Unlike its peers Bank of Canada and European Central Bank, the Fed is likely to drill home the message of patience that rates may stay elevated for longer until it has gained greater confidence that inflation is moving sustainably towards the 2% objective.

“Our view remains unchanged that the Fed will keep its current federal funds target rate (FFTR) steady at 5.25% to 5.50% and maintain this terminal FFTR level for longer beyond June, where we factor in 50 basis points of rate cuts for 2024 (that is two 25bps cuts, one in September and another in December). Attention will be on the Dotplot to gauge any further dampening of the number of cuts projected for 2024 by the Federal Reserve policymakers.”

Another G7 central bank that will announce its monetary policy is the Bank of Japan (BoJ) on Friday.

“The weak first-quarter gross domestic product (GDP) outturn affirms our cautious expectations for BoJ’s normalisation path to be long, gradual and limited. We expect BoJ to stay ‘hold’ for now, although we expect it to lift the short-term policy rate balances from 0.1% to 0.25%, but that increase may come only in 4Q2024. BoJ may start the discussion to slow the pace of bond buying, although a decision is not expected in this meeting,” Liew says.

Other central banks announcing their monetary policy decisions include the Bank of Thailand (BoT) on Wednesday and Taiwan’s Central Bank of the Republic of China (CBC) on Thursday. Bloomberg data shows that 21 out of 25 economists expect BoT to keep the policy rate unchanged at 2.5%, with four analysts, including UOB, calling for a 25bps cut.

Liew says: “Despite better-than-antici­pated first quarter 2024 GDP readings, it remains below historical trends and BoT’s estimated potential growth rate of 3%. As a result, we stay with our call for a cumulative 50bps rate cut in 2024 at the June and August meetings.

“This adjustment would support a stronger economic recovery and better align with the lower potential growth in the post-pandemic era, while targeted measures to tackle household debts would help mitigate financial stability risks. Having said that, we note BoT’s hawkish stance to keep the rate unchanged to address the household debt overhang.”

He also expects CBC to be on hold at 2%, given its continued monitoring of the pass-through of the electricity tariff hike on inflation. “Having said that, the central bank is likely to maintain its tightening stance amid strong economic growth and sticky prices even as the impact of the April electricity tariff increase appears to be contained so far,” he says.

As for BoJ, he thinks it “may start the discussion to slow the pace of bond buying, although a decision is not expected in this meeting”.

On the economic front, Asia-Pacific data releases include China’s May Consumer Price Index (CPI) and Producer Price Index on Wednesday, while the nation’s May money supply, new renminbi loans and aggregate financing are likely to be released between June 9 and 15.

Similarly, India will release its April industrial production data, May CPI as well as May trade balance on Saturday.

Other anticipated data from the region includes Indonesia’s Consumer Confidence Index for May and Malaysia’s April Industrial Production Index (Monday), April trade from the Philippines (Tuesday), followed by Australia’s May employment report (Thursday).

Bloomberg expects the Philippines’ April exports to grow 6.7% year on year after contracting 7.3% in March, and imports to drop 6% y-o-y after contracting 20% in March. Trade deficit is estimated at US$3.52 billion (RM16.51 billion) versus US$3.18 billion in March.

Meanwhile, Australia’s May unemployment is forecast to fall to 4%, from 4.1% in April.

Across the Causeway, the data docket in the second week of June will be light, with just the mid-week release of the Monetary Authority of Singapore’s latest Survey of Professional Forecasters from Monday to Wednesday.

On the corporate front, Bursa Malaysia-listed companies that will be holding their annual general meetings include Pekat Group Bhd (KL:PEKAT), MI Technovation Bhd (KL:MI) and GDEX Bhd (KL:GDEX) on Tuesday; Genting Malaysia Bhd (KL:GENM), Favelle Favco Bhd (KL:FAVCO), Muhibbah Engineering (M) Bhd (KL:MUHIBAH) and Chin Hin Group Bhd (KL:CHINHIN) on Wednesday; WCT Holdings Bhd (KL:WCT), Genting Bhd (KL:GENTING), Capital A Bhd (KL:CAPITALA) and Coastal Contracts Bhd (KL:COASTAL) on Thursday; and Frontken Corp Bhd (KL:FRONTKN) on Friday.

GDEX’s and Mudajaya Group Bhd’s (KL:MUDAJYA) extraordinary general meetings will be held on Tuesday and Thursday respectively.

At the courts, hearing of SRC International Sdn Bhd’s lawsuit against Datuk Seri Najib Razak on Monday will continue for most of the week. Monday will also witness the hearing of Tun Dr Mahathir Mohamad’s leave application to have the Pulau Batu Puteh Royal Commission of Inquiry opened to the public and to disqualify three commissioners — including former Chief Justice Tun Md Raus Sharif, who is acting as RCI chairman.

According to a federal counsel, the Attorney-General’s Chambers will be objecting to Mahathir’s leave application.

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