Deutsche Bank-Asia Week Ahead Chart of the week 25 - 29 August-117431838

T2se3r0Ot6kwoPaT2se3r0Ot6kwoPaDistributed on: 24/08/2025 15:54:06 GMTDistributed on: 24/08/2025 15:54:06 GMT24 August 2025Deutsche BankResearch Asia Economics Asia Week Ahead Date Week AheadChair Powell’s Jackson Hole pivot provides support for Asian FX, including the Korean won and the peso, removing an obstacle to rate cuts on 28 August. While we have maintained our prevailing forecast of rate cuts by both the BoK and BSP, of the two, we see a greater risk to our call on the BoK. While both face the task of supporting growth to help close the negative output gap, the BoK's task is complicated by its policy preoccupation with Seoul housing prices, while the high-stakes summit between President Lee and Trump also weighs on its decision.We see BSP lowering its policy rate by 25bps on 28 August.In the June monetary policy report, BSP noted that the negative output gap was now expected to close towards end-2027, instead of end-2026 as we understood from earlier in March. Moreover, Philippines’ headline inflation fell by a sharp 0.5-ppt to 0.9% YoY in July, the lowest since Oct 2019, and bringing the YTD average to 1.7%. Consequently, the real rate remains elevated. We expect inflation to remain below BSP’s 2-4% target going into early-2026. President Marcos’ order to suspend rice imports in Sep-Oct this year could add some upsides to inflation, but it is unlikely to cause overshoots in inflation for a sustained period, barring any extensions to the suspension or increases in tariffs on rice imports. See BSP to cut in Aug and Dec to further support growth for details.While we have maintained our forecast of a 25 bps rate cut by the BoK, there are two factors that could prompt the BoK to delay its rate cuts until later: housing and the high-stakes summit between President Lee and Trump, which could have significant impact on South Korea's outlook. For example, details related to the trade deal between the US and South Korea are pending, including the latter's USD 350 billion investment pledge, and the "modernization" of the US's alliance with South Korea, beyond shipbuilding. Meanwhile, housing prices remain a significant source of uncertainty for the BoK's policy decision, despite the moderation in the week-on-week increase in Seoul housing prices. There is also the matter of the government's plan to further strengthen household debt management and increase the supply of affordable rental housing. At the same time, the construction sector remains under significant pressure, with the government seeking to clean up real estate PF loans. The sectors requiring and targeted for restructuring have been expanded to include the petrochemical sector, reflecting structural pressure on South Korea's manufacturing sector. Despite this, however, positive data surprises in Q2 will prompt the BoK to revise up its growth forecast Juliana LeeChief Economist+65-6423-5203Kaushik DasChief Economist+91-22-7180 4909Yi Xiong, Ph.D.Chief Economist+852-2203 6139Jun