• Fed hints at imminent rate cut, likely in September. The U.S. Federal Reserve (Fed) Chair Jerome Powell, in his speech at Jackson Hole Symposium, said that “the time has come for policy to adjust”, reinforcing market expectations of a rate cut at the upcoming policy meeting on September 17-18. According to Fed Fund Futures, the market currently assigns about a 70% chance to a 25bp cut and a 30% chance to a 50bp cut. With the U.S. inflation edging closer towards the 2.0% target, the Fed has grown increasingly concerned about the softening job market. U.S. non-farm payrolls were recently revised down to 2.1 million for the 12 months ending March 2024, from 2.9 million previously, which reduced average monthly job gains to 178K from 246K.

• RBNZ joins the rate-cut bandwagon. At the conclusion of its August policy meeting, the Reserve Bank of New Zealand (RBNZ) delivered its first rate cut since March 2020, lowering the benchmark Official Cash Rate (OCR) by 25 basis points to 5.25%. The cut, which surprised many market participants, was justified by the RBNZ due to inflation returning towards the target range of 1.0- 3.0% (2Q24: 0.4% QoQ, 3.3% YoY; 1Q24: 0.6% QoQ, 4.0% YoY). The central bank projects that the OCR will decrease further to 4.92% by year-end and to 3.85% by December 2025. This is a significant shift from its previous projection, which anticipated no rate cuts until mid-2025.

• Malaysia's GDP surges to a six-quarter high of 5.9% in 2Q2024. The economy accelerated from 4.2% in 1Q2024, bringing overall growth for 1H2024 to 5.1% (1H2023: 4.1%). Private consumption remained the key growth driver, rising to 6.0% (1Q2024: 4.7%) on the back of strong holiday demand, government cash transfers, a vibrant tourism sector and resilient labour market conditions. Investment activity reached its strongest level in seven quarters, growing by 11.5% (1Q2024: 9.6%), primarily driven by increased private sector investments (2Q2024: 12.0%; 1Q2024: 9.2%) amid ongoing development projects and capacity expansions. Meanwhile, exports picked up further, growing by 8.4% (1Q2024: 5.2%), underpinned by the global semiconductor recovery. While there is an upside risk to our current full-year growth forecast of 4.7% for 2024, growth is expected to moderate in 2H2024 due to a more challenging global economic backdrop.

Source: BIMB Securities Research - 3 Sept 2024