After the Fed cut interest rates in September, most global markets entered a period of easing, kicking off a rate cut wave in emerging markets in Asia!

On Wednesday, October 16th, the Bank of Thailand unexpectedly cut interest rates by 25 basis points to 2.25% with a vote of 5-2, marking Thailand's first rate cut since 2020, aiming to stimulate a weak economy; the Philippines also announced a 25 basis point rate cut to 6% today to boost the economy and address increasing overseas uncertainty risks. Last week, the Bank of Korea cut rates by 25 basis points to 3.25%, while the Reserve Bank of India, though maintaining interest rates, shifted its policy stance to neutral, hinting at a possible rate cut.

After today's rate cut announcement, the Bank of Thailand raised its 2024 economic growth forecast from the previous 2.6% to 2.7%, but lowered the 2025 economic growth forecast from 3% to 2.9%. In addition, the Bank of Thailand also lowered the 2024 overall inflation forecast from 0.6% to 0.5%, still below the target range of 1%-3%. The Philippine central bank reduced its 2024 inflation forecast from the previous 3.3% to 3.1%, but raised the 2025 inflation forecast from 2.9% to 3.3%.

Economists predict that Thailand and the Philippines may both cut interest rates by 25 basis points in December. Thailand's economic growth lags behind its neighbors due to high household debt, high borrowing costs, and weak exports; while the Philippines has inflation below the central bank's target range and shows signs of slowing down.

Since September 2023, the Thai interest rate has been kept at its highest level in a decade at 2.5%. After the unexpected rate cut, Thailand's benchmark stock market index, the SET Index, rose by 2.54%. The Thai Baht fell to a intraday low against the US dollar, trading at 33.384 Thai Baht per US dollar.

The rate cut by the Philippines this time brought interest rates to the lowest level since February 2023. After the announcement, the Philippine Stock Exchange index, PSEi Index, fell slightly. The Philippine Peso against the US dollar remained stable.

Thailand cuts interest rates by 25 basis points to address high household debt, high borrowing costs, and weak exports.

As the second largest economy in Southeast Asia, Thailand's economic growth lags behind neighboring countries due to high household debt, high borrowing costs, and weak exports.

As of June this year, Thailand's total household debt amounted to 16.3 trillion baht (approximately 488.9 billion USD), accounting for 89.6% of GDP, making it one of the countries with the highest ratios in Asia. The Bank of Thailand stated that the rate cut would help alleviate the burden of household debt without affecting the process of reducing the household debt-to-GDP ratio.

In the previous quarter, the baht appreciated by 14%, putting Thailand's exports at a disadvantage compared to competitors. Miguel Chanco, Chief Emerging Asia Economist at Pantheon Macroeconomics, stated: 'Given the rapid appreciation of the baht, the reasons for the rate cut become more compelling.' Chanco also predicted that the Bank of Thailand may cut rates again in December.

Just hours before the interest rate decision, Thai Commerce Minister Pichai Naripthaphan called for a 50 basis point cut this year, while the Federation of Thai Industries once again urged a 25 basis point cut to ease the financial burden on businesses.

With this rate cut, the Bank of Thailand raised the economic growth forecast for 2024 from the previous 2.6% to 2.7%, but lowered the forecast for 2025 from 3% to 2.9%. The World Bank predicts Thailand's economy to grow by 2.4% this year and by 3% in 2025.

The Bank of Thailand also adjusted the overall inflation rate forecast for 2024 from 0.6% to 0.5%, still below the target range of 1%-3%.

The Philippines cut interest rates for the second time this year, and may continue to cut rates in December.

Eli Remolona, Governor of the Philippines central bank, stated today that the central bank's 25 basis point rate cut marks the continuation of an easing cycle that started in August, when the central bank cut rates by 25 basis points, preempting the actions of the Federal Reserve.

The rate cut in the Philippines today was expected, as inflation in the Philippines continues to ease and external uncertainties increase. Analysts believe that the Philippines still has room for further rate cuts, with a possible additional cut of 25 basis points in December, as inflation in the Philippines remains below the central bank's target range of 2%-4%, and the economy shows signs of slowing down - government data shows that the Philippines' GDP grew by 6.3% year-on-year in the second quarter, but only increased by 0.5% quarter-on-quarter.

In this rate cut, the Philippines central bank revised its inflation expectations for 2024 from the previous 3.3% to 3.1%, but raised the expectations for 2025 from 2.9% to 3.3%, and for 2026 from 3.3% to 3.7%.

Last week, South Korea cut interest rates, and India indicated a possible rate cut.

On October 11th, the Bank of Korea (BOK) lowered its benchmark interest rate by 25 basis points to 3.25%, as expected. This is the first rate cut by the Bank of Korea since the 2020 pandemic. Park Seok Gil, Chief Economist at JPMorgan, commented that the Bank of Korea's decision could herald the beginning of a larger rate cut cycle. Kathleen Oh, Chief Economist of Morgan Stanley Korea, predicted that after the 25 basis point cut in October, the Bank of Korea will cut rates for three consecutive quarters, eventually lowering the benchmark rate to 2.5%.

On October 9th, the Reserve Bank of India (RBI) kept rates unchanged, but shifted its hawkish monetary policy stance to neutral. This is the first change in stance by the Indian central bank since June 2019. Economists predict that the Reserve Bank of India may cut rates at the December meeting.