Fed jumbo rate cut puts pressure on money market fund investors

Investment advisers are urging clients to dump hefty cash allocations now that the Federal Reserve has begun its much-anticipated interest-rate easing, a process they expect to limit the appeal of money-market funds in the coming months.

Retail investors’ assets in money market funds have grown by USD 951 billion since 2022, when the Fed started its rate-hiking cycle to tame inflation, according to the Investment Company Institute, which represents investment funds. Their assets stood at USD 2.6 trillion on Sept. 18, roughly 80% higher than at the beginning of 2022. Total money market assets stood at USD 6.3 trillion.

“As investors are now more convinced that the Fed will reduce rates in line with its guidance, investors will likely grasp for yields that will not dwindle overnight,” said Hannes Hofmann, head of the family office group at Citi Private Bank, adding appetite for risk is likely to increase.

On Wednesday, the US central bank cut the federal funds rate by a larger-than-usual 50 basis points to a range of 4.75% to 5%, which makes holding cash in deposit accounts and cash-like instruments less appealing.

“You’re going to have to shift everything … further up in the amount of risk you’re accepting,” said Jason Britton, Charleston-based founder of Reflection Asset Management, who manages or oversees around USD 5 billion in assets. “Money-market assets will have to become fixed-income holdings; fixed income will move into preferred stocks or dividend-paying stocks.”

Money-market funds – ultra-low-risk mutual funds that invest in short-term Treasury securities and other cash proxies – are a way to gauge investor interest in the nearly risk-free returns they offer. When short-term interest rates climb, money-market returns rise with them, increasing their appeal to investors.

“Investors may need to look at something different, or longer-term, to lock in rates and not be as exposed to the Fed lowering interest rates,” said Ross Mayfield, investment strategist at Baird Wealth.

Some investors could end up transferring funds from money market funds to equities, advisers say. Daniel Morris, Chief Market Strategist, BNP Paribas Asset Management, said the appeal of money market funds will wane. Morris said he sees better opportunities in equities and is slightly overweight equities versus fixed income.

Carol Schleif, chief investment officer of BMO Family Office, expects investors to keep some cash on the sidelines to wait for opportunities to buy stocks.

It could take a while for initial reactions to the Fed’s decision on Wednesday to show up in money-market fund flows, as it has been tough to persuade retail investors to abandon their cash holdings, analysts note. Assets in money market funds tend to peak nine months after the first rate cut, BofA Securities said in a report.

“If people see a broader-based advance in stocks, they may move out of cash more quickly, as that would point to owning riskier assets as a good thing,” said Christian Salomone, chief investment officer of Ballast Rock Private Wealth.

Investors “are stuck between a rock and a hard place,” Britton said, faced with a choice between investing in riskier assets or earning a smaller return from cash-like products.

(Reporting by Suzanne McGee and Carolina Mandl; additional reporting by Davide Barbuscia; Editing by Megan Davies, Rod Nickel, and Nick Zieminski)

Yen nurses losses as BOJ meets, dollar dogged by rate outlook

SYDNEY – The yen remained under pressure on Friday as investors wagered the Bank of Japan (BOJ) would wrap up a policy meeting sounding cautious on further tightening, while the US dollar had its own problems as markets priced in more rapid US rate cuts.

It has been a tough week for the yen, with the euro gaining 2.2% to 159.46 as speculators booked profit on recent long yen positions.

The euro also firmed to USD 1.1160, up 0.8% for the week and within striking distance of the August peak of USD 1.1201. A break there would target a July 2023 top of USD 1.1275.

The dollar was up 1.4% for the week at 142.84 yen, though off an overnight high of 143.95. Resistance was at 144,20, while support lay at the recent trough of 139.58.

The BOJ is widely expected to hold its policy interest rate at 0.25% later on Friday and maintain its view the economy will recover moderately as rising wages underpin consumption.

Data on consumer prices out on Friday showed core inflation ticked up to 2.8% in August, while overall inflation hit 3.0%.

Samara Hammoud, a currency strategist at CBA, noted Japan’s real rate remained deeply negative at about -2.5%, while the BOJ estimated neutral to be in a range of -1% to 0.5%.

“As such, there is scope to further raise the policy rate while keeping financial conditions accommodative,” she said. “Our base case remains for the BOJ to next raise rates by 25bp in October, though the risk leans towards a later hike.”

“The recent financial market ructions and the upcoming Liberal Democratic Party election may make the BOJ more cautious about raising.”

The BOJ’s policy statements can sometimes be rather opaque, so investors will be focused on any hints from Governor Kazuo Ueda on the timing and pace of tightening at his post-meeting news conference.

DOLLAR DECLINE

Much of the rest of the world is heading in the other direction, with markets expecting China’s central bank to trim its longer-term prime rates by 5-10 basis points on Friday.

China has also been hinting at other stimulus measures, enabled in part by the US Federal Reserve’s aggressive easing which shoved the dollar to a 16-month low on the yuan.

Markets imply a 40% chance the Fed will cut by another 50 basis points in November and have 73 basis points priced in by year-end. Rates are seen at 2.85% by the end of 2025, which is now thought to be the Fed’s estimate of neutral.

That dovish outlook has bolstered hopes for continued US economic growth and sparked a major rally in risk assets. Currencies leveraged to global growth and commodity prices also benefited, with the Aussie topping USD 0.6800.

The US dollar index was stuck at 100.69 and just above a one-year low.

Sterling was another gainer after the Bank of England kept rates unchanged on Thursday, while its governor said it had to be “careful not to cut too fast or by too much”.

The pound was up 1.1% for the week so far at USD 1.3276, having hit its highest since March 2022.

(Reporting by Wayne Cole; Editing by Christopher Cushing)

Japan’s Nikkei rallies on Wall Street’s lead as BOJ decision looms

TOKYO – Japan’s Nikkei share average rose strongly in early trading on Friday, tracking overnight gains on Wall Street, while traders also kept a wary eye on a Bank of Japan policy announcement later in the day.

The tech-heavy Nikkei was up 1.8% at 37,822.84, as of 00:04 GMT, with chip-sector stocks outperforming in line with US equity moves on Thursday. Chip-making equipment giant Tokyo Electron 8035.T soared 4.6%.

Automakers also gained amid a weakening yen, which boosts the value of overseas revenue. Toyota Motor advanced 1.7%.

Of the Nikkei’s 225 components, 211 rose, 12 fell and two were trading flat.

The broader Topix gained 1.42%.

The time of the BOJ announcement isn’t set, but typically comes around 03:00-04:30 GMT. Stocks are in a midday recess from 02:30-03:30 GMT.

The central bank is set to keep monetary policy steady on Friday, but signal its confidence that solid wage growth and consumption will allow it to raise interest rates again in the coming months.

BOJ Governor Kazuo Ueda is due to brief the media at 06:30 GMT.

(Reporting by Kevin Buckland; Editing by Rashmi Aich)

US bank stocks rise as jumbo rate cut eases credit risk, cost concerns

US bank stocks rose on Thursday after the Federal Reserve’s 50 basis point cut in interest rates raised hopes of lower deposit costs and reduced pressure on borrowers.

Banks have set aside billions as a cushion against potential defaults among borrowers, particularly in their commercial real estate (CRE) portfolios where a lack of demand for office spaces has led to immense pressure.

“For banks, particularly those that hold mortgages and auto loans, there may be a benefit to spreads in the near term,” said Charlie Wise, senior vice president and head of global research and consulting at TransUnion.

Wells Fargo climbed 3% while JPMorgan Chase, the largest US bank by assets and the sector’s bellwether, was trading 1% higher.

Citigroup and Bank of America climbed 2.6% and 2.3%, respectively.

Wall Street powerhouse Goldman Sachs gained 3%, while rival Morgan Stanley was up 1.3%.

REFINANCING WINDOW

Top banks echoed the Fed’s move and reduced their prime lending rates on Wednesday, but most auto loans and mortgages carry a fixed rate of interest, which means they will continue to fetch higher yields from such debt even after the cut.

Still, borrowers looking for immediate relief could refinance their loans and negotiate better repayment terms, lowering the risk of defaults.

“The Fed cut reduces uncertainty over the borrowing costs and the economy,” said J.P. Morgan analyst Steven Alexopoulos.

“We expect a lower funds rate to ignite commercial borrower demand for loans.”

Regional banks are expected to benefit more from rate cuts, compared with their larger rivals, since they have a bigger exposure to the CRE sector.

Shares of Valley National, Banc of California, KeyCorp, and Western Alliance rose nearly 3.8% each.

“The initial positive reaction by the bank stock indices makes sense, as a 50 bp cut takes the edge off the high-end credit concerns,” analysts at Jefferies said.

Allen Tischler, senior vice president of Financial Institutions Group at Moody’s Ratings, also said the cuts “will be credit positive for asset quality because lower rates make debt payments more affordable for borrowers with floating-rate loans.”

Still, lenders are maneuvering a delicate economic environment. While investors expect the Fed to continue easing in the coming months, some have questioned if the central bank is behind the curve.

Sentiment toward the banking sector had also taken a hit after three major players collapsed in early 2023, in part due to higher rates that pushed up unrealized losses in their investment portfolios.

The KBW Regional Banking Index is up 4.4% this year through the previous close, compared with an 18% gain in the benchmark S&P 500.

The S&P 500 Banks Index, which tracks large-cap banks, has gained 17.5% in the same period.

“(The rate cut) leaves open the question about the underlying economy and if the pace of slowing is in fact worsening in the Fed’s mind,” Jefferies said.

(Reporting by Manya Saini and Niket Nishant in Bengaluru; Editing by Shailesh Kuber)

Gold gains over 1% as Fed begins deeper rate-cut cycle

Gold prices rose over 1% on Thursday as the US Federal Reserve launched its monetary easing cycle with a half percentage point move, boosting bullion to an all-time high and just a few cents shy of the key USD 2,600 ceiling in the previous session.

Spot gold rose 1.2% to USD 2,590.47 per ounce by 2:02 p.m. ET (1802 GMT). US gold futures GCcv1 settled 0.6% higher at USD 2,614.60.

Spot prices scaled a record high of USD 2,599.92 on Wednesday after the Fed lowered the benchmark policy rate by 50 basis points to 4.75%-5.00%.

Fed policymakers also projected the benchmark interest rate would fall by another half of a percentage point by the end of this year, a full percentage point next year, and half of a percentage point in 2026.

“The market is factoring in bigger and more rate cuts because we have both fiscal and trade deficits, and that’s going to further weaken the overall value of the dollar,” said Alex Ebkarian, chief operating officer at Allegiance Gold.

“If you combine geopolitical risks with the current deficit that we have, along with the low yielding environment and weaker dollar, the combination of all these is what’s leading to gold’s rally.”

Monetary policy easing by global banks, along with robust central bank buying and geopolitical concerns have fuelled a rally in gold prices to record highs multiple times this year.

Bullion is considered a safe asset during political and economic uncertainty. It also tends to thrive in a low-rate environment.

“This rally could go further, in our view. We target USD 2,700/oz by mid-2025. Alongside the near-term risk drivers, we anticipate greater gold ETF demand to gather pace in the coming months,” UBS said in a note.

Elsewhere, spot silver rose 3.5% to USD 31.11 per ounce.

“We maintain our view that silver is set to benefit from a rising gold price environment,” UBS added.

Platinum rose 2.3% to USD 990.45 and palladium gained 2.6% to USD 1,089.25.

(Reporting by Anushree Mukherjee in Bengaluru; Additional reporting by Swati Verma; Editing by Janane Venkatraman, Shailesh Kuber, and Shounak Dasgupta)

Dollar rebounds after Fed goes big on rate cut

SINGAPORE – The US dollar rose broadly on Thursday, recovering from an earlier tumble in the immediate aftermath of the Federal Reserve’s outsized interest rate cut that had been largely priced in by markets.

The US central bank on Wednesday kicked off its monetary easing cycle with a larger-than-usual half-percentage-point reduction that Chair Jerome Powell said was meant to show policymakers’ commitment to sustaining a low unemployment rate now that inflation has eased.

While the size of the move had been anticipated by investors in part due to a slew of media reports pointing in that direction ahead of the decision, it defied the expectations of economists polled by Reuters, who were leaning toward a 25-basis-point cut.

Still, markets reacted in a typical “buy the rumor, sell the fact” fashion that kept the dollar on the front foot in early Asian trade. It rebounded from a more than one-year low against a basket of currencies in the previous session and was last marginally higher at 101.03 =USD.

Against the yen, the greenback gained 0.58% to 143.12. The euro fell 0.04% to USD 1.1113, away from a three-week high hit in the previous session.

“Obviously, (there was) a lot of volatility on the announcement, but in terms of the pricing action and the information that came out … it’s not really that controversial in a sense,” said Rodrigo Catril, senior FX strategist at National Australia Bank (NAB).

“It’s sort of been pretty close to what the market has been pricing, particularly in terms of expectations of – arguably a little bit more than a 100 – but 100 bps of rate cuts this time around and another 100 next year, and also a terminal rate that is below 3% as well. So the big picture … is not materially different.”

Fed policymakers on Wednesday projected the benchmark interest rate would fall by another half of a percentage point by the end of this year, a full percentage point next year and half of a percentage point in 2026, though they said the outlook that far into the future is necessarily uncertain.

“Our view is that the dollar will depreciate next year. That is a cyclical story, not a structural story,” said Eric Robertsen, Standard Chartered’s global head of research and chief strategist at a media roundtable in Singapore on Wednesday.

“We think the dollar is going to weaken because the Fed is easing interest rates and the global economy will experience a soft landing, which tends to be a benign scenario that tends to be negative for the dollar.”

Sterling fell 0.11% to USD 1.3199 after scaling a peak of USD 1.3298 in the previous session, its strongest level since March 2022.

That came in the wake of data on Wednesday which showed British inflation held steady in August but sped up in the services sector closely watched by the Bank of England, reinforcing bets that the central bank will keep interest rates on hold later in the day.

“When it comes to the Bank of England, clearly those inflation numbers yesterday show that they still have a concern or a problem with inflation, and in particular services inflation is still too high for comfort,” said NAB’s Catril.

“So to expect an easing today because of what the Fed has done seems a little bit too hard to believe.”

Elsewhere, the Australian dollar edged up 0.05% against its US counterpart to USD 0.6768, while the New Zealand dollar advanced 0.04% to USD 0.6210.

Data out on Thursday showed New Zealand’s economy contracted in the second quarter as activity fell in a number of industries, though the figures came in better than forecasts.

(Reporting by Rae Wee; Editing by Christopher Cushing)

How some hedge funds would trade a rate cutting cycle

LONDON – While many investors hope falling interest rates will usher in a soft economic landing, others forecast a calm before the storm.

Here are hypothetical trading ideas shared by three hedge funds on what is next for the US and global economies at the start of a US easing cycle.

Markets fully price in a quarter-point rate cut and a 60% chance of a bigger 50 basis point cut later on Wednesday.

They said regulations prevented them from revealing their actual trading positions or making recommendations.

1/ CONFIDO CAPITAL

* Amplified income strategies

* Launched in 2024

* Key trade: Short risk assets, buy protection on high yield credit

Brad Boyd, founder of Confido Capital, said the anticipation of lower rates has fuelled rosy equity and credit price levels that creates an asymmetry of risks in the market.

He said he would short any kind of risk asset like stocks, the bonds of companies which might have a low-quality balance sheet, real estate or emerging markets. Specifically, he would buy credit default swaps, sometimes likened to a form of insurance in bond markets.

A short position bets that an asset’s price will fall, while a long position bets on a rise.

Rather than pick a particular company, Boyd would take long positions via the index, HY CDX, a basket of credit default swaps, or insurance premiums on 100 high yield bonds in the US

In the short term, Boyd warned that markets were overpriced for Fed easing and could take a hit if cuts did not live up to expectations.

“There could be plenty of hand-wringing and crying in the streets,” said Boyd.

2/ MONROE CAPITAL

* Direct lending and alternative credit solutions

* Size: USD 19.5 billion

* Founded in 2004

* Key trade: opportunistic buying in secondaries markets

Kyle Asher, managing director and co-head of alternative credit solutions at Monroe Capital, would look to the secondaries market to see Fed rate cuts play out.

Secondaries markets trade financial instruments such as stocks, bonds and loans — most often from private equity investors — but also from any investor selling to another investor.

“The rate cuts will buoy many sectors that will benefit from paying lower interest rates on their loans including software, business services, and media companies,” said Asher.

Fed rate cuts typically filter out across the economy, pushing the cost of borrowing for corporates and consumers down.

“A lot of the more medium-sized private companies have loans trading around 70 to 80 cents which will see their cash flow rise when the cost of borrowing falls,” said Asher.

As the cost of servicing their debt falls, companies will be able to spend more on measures that boost their production, their growth such as research and development, more marketing and more staff, added Asher.

3/ ANALOG CENTURY MANAGEMENT

* Hard tech-focused long/short fund

* Size: USD 1.8 bln

* Founded in 2018

* Long chip makers for auto and industrial applications

Val Zlatev’s hedge fund Analog Century Management is focused on hard tech, meaning companies that manufacture semiconductors, communication equipment and system hardware.

He divides them into two groups: secular growth companies and manufacturers that are much more exposed to mature applications spending such as the hardware that goes into smartphones and PCs.

“Semiconductor stocks exposed to industrial and automotive have been suffering for quite a while. Revenues have fallen and many have technically been in recession already for a number of quarters,” said Zlatev.

If falling rates rejuvenate industrial spending and make it easier for consumers to borrow money to buy cars, earnings will expand and that will be reflected in the stock price of these companies, he says.

(Reporting by Nell Mackenzie; Editing by Dhara Ranasinghe and Alexander Smith)

US yield curve hits steepest in two years as Fed opts for big rate move

NEW YORK – The US Treasury yield curve on Wednesday touched its steepest level since July 2022 after the Federal Reserve cut interest rates by 50 basis points, a larger-than-usual rate reduction as the central bank grappled with a weakening labor market.

The widely tracked spread between US two- and 10-year yields hit as wide as 10.2 bps and was last at 8.6 bps. A steeper curve suggests more easing is on the way.

The Fed in a statement said it has gained greater confidence that inflation is moving sustainably toward its 2% goal and that the risks between prices and employment are roughly in balance. It slashed the benchmark overnight rate to a range of 4.75% to 5%.

Before the rate decision, futures on the fed funds rate, which measures the cost of unsecured overnight loans between banks, had been betting on a 50-bp cut, even as a majority of Wall Street economists were anticipating a 25-bp move.

“I think it was fairly anticipated that, whether it was 25 or 50 basis points, what was most important was the messaging behind 50 basis points,” said Tom Hainlin, senior investment strategist, at US Bank in Minneapolis.

“And if the messaging was, ‘We’re very concerned about a potential contraction or slowdown in the economy’ … we didn’t hear that messaging. So this wasn’t necessarily some preventative medicine for something bad that was going on in the economy, but more they felt that they had the opportunity to bring rates down from a high level.”

Late in the session, US Treasury yields rose in choppy trading. The benchmark 10-year yield rose 7.1 bps to 3.713% after earlier hitting its highest in more than a week. The yield posted its best daily gain since Aug. 21.

US 30-year yields increased 7.6 bps to 4.029%, also registering its largest daily rise in about a month.

On the front end of the curve, US two-year yields advanced 4.2 bps to 3.634%.

The US central bank’s forecast, or the so-called “dots” showed rates going down to 4.375% by the end of 2024, which suggested about an additional 50-bp of easing this year. The year-end forecast for 2025 showed additional cuts of 100 bps, and a final 50 bps in 2026 to end in a 2.75%-3.00% range.

In a press conference, Fed Chair Jerome Powell noted that the central bank is in no rush to cut rates, adding that it will move as fast or as low as it thinks appropriate.

Elyse Ausenbaugh, head of investment strategy at J.P. Morgan Wealth Management, wrote in emailed comments that the decision to go big with the rate cut and Powell’s message during the press conference bolstered expectations for the soft landing scenario for the US economy.

“Did the economy need a 50-bp cut today to avoid a breakdown? We don’t think so; the labor market is slowing but not crumbling, retail sales data released earlier this week showed a resilient consumer, and the outlook for corporate earnings and profit margins looks solid.”

Following the rate decision, fed funds futures have priced in about 74 bps in cuts over the next two policy meetings, and 190 bps of cumulative easing by the end of 2025.

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Nupur Anand; Editing by Alistair Bell and Jonathan Oatis)

Wall Street droops, dollar edges back after bumper Fed cut

NEW YORK – Major stock indexes closed with modest losses and the dollar gained ground in choppy trading on Wednesday after the US Federal Reserve opted for a supersized cut in its first move to borrowing costs in more than four years.

The central bank cut the overnight rate by half a percentage point, more than the quarter-point that is customary for adjustments, citing greater confidence that inflation will keep receding to its 2% annual target.

That rate, which guides how much interest banks pay each other and affects rates for consumers, is now 4.75%-5.00%, the lower end of the range markets had been expecting.

The benchmark S&P 500 rose as much as 1% after the announcement before retreating to close down 0.29% at 5,618.26.

“It’s important to note that stocks are not rocketing ahead (at least not yet) after getting what they wanted. After seven straight up days, a lot of good news was priced in,” said Steve Sosnick, chief market strategist at Interactive Brokers in Greenwich, Connecticut.

The Dow Jones Industrial Average closed down 0.25%, at 41,503.10, and the Nasdaq Composite shed 0.31%, to end at 17,573.30.

Rates had been parked at their highest levels in more than two decades since July 2023.

MSCI’s index of world stocks rose to a record high during the session before turning south. It was last quoted down 0.29% at 826.29.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, weakened after the announcement before rising 0.07% to 100.98.

In the market for US government debt, yields on rate-sensitive 2-year Treasuries, rose 3.8 basis points to 3.6297%, from 3.592% late on Tuesday.

The yield on benchmark 10-year notes rose 6.6 basis points to 3.708%, from 3.642% late on Tuesday.

A BIG BITE TO START

Attention quickly turned to what the Fed would do next as it seeks to fulfill its two-part mandate to promote maximum employment and stable prices.

Chair Jerome Powell said he saw no sign of a recession, citing solid growth, lower inflation, and “a labor market that’s still at very solid levels”. He also said the Fed might have started cutting sooner, on the back of a surprisingly weak July jobs report, if it had seen that data earlier.

Markets are now fully pricing in a cut of at least 25 basis points at the central bank’s next meeting in November, with a roughly 40% chance for another 50 basis point cut.

“There’s a ton of room to go lower here, combined with what I would call wobbly labor data, wobbly not terrifying… They took a big bite to start,” said Tom Herrick, chief market strategist at Cary Street Partners in Richmond, Virginia.

Next up on a busy policy calendar is a Bank of England meeting on Thursday, which financial markets anticipate will keep interest rates on hold. The Bank of Japan is expected to do the same on Friday.

On Wednesday afternoon following the Fed meeting, the Japanese yen JPY= strengthened 0.11% to 142.24 per dollar. Sterling strengthened 0.28% to USD 1.3193.

Gold fell 0.62% to USD 2,553.67 an ounce, having touched record highs earlier this week.

Oil prices fell, as the rate cut was seen as a response to unease about the US labor market. Brent crude settled at USD 73.65 a barrel, losing 5 cents.

(Reporting by Kevin Buckland in Tokyo and Sruthi Shankar in London; Editing by David Evans, Nick Zieminski, and Jamie Freed)

Fed goes big, markets yo-yo

“Go big, and go bold,” was the advice to Fed Chair Jerome Powell and colleagues from some US policy watchers and even former policymakers, and didn’t they do just that.

The Federal Reserve’s half-percentage point interest rate cut on Wednesday was a statement of intent that the Fed stands ready to protect the labor market and steer the economy away from anything approaching recession.

Investors liked it, at first. The S&P 500, Dow, and gold all leaped to fresh record highs, the Russell 200 small caps index rallied nearly 2%, and the dollar fell across the board.

But stocks’ and gold’s gains melted away and the dollar bounced back from a 14-month low to close the US session up on the day.

What gives? Maybe the bond market reaction was most prescient. Treasury yields rose across the curve, more so at the longer end, perhaps on underlying worries over inflation and easier financial conditions, or because the Fed slightly revised up its long-run forecast for the fed funds rate.

This sends mixed signals for Asian markets on Thursday.

Who says central banks no longer retain the element of surprise? Bank Indonesia’s quarter-point rate cut on Wednesday was not on the cards – only three of the 33 economists polled by Reuters predicted the move, with the remaining 30 expecting the policy rate to be left at 6.25%.

Perhaps surprisingly, the rupiah didn’t move much and stuck close to its strongest levels against the dollar in about a year.

Now that the Fed has taken its first step on its easing path also, other central banks in Asia are likely to feel more comfortable loosening policy. But not Taiwan, not yet at least.

Taiwan’s central bank is expected to keep its policy interest rate unchanged on Thursday, according to all 32 economists surveyed in a Reuters poll, and stay the course until late next year as it deals with lingering inflation concerns.

The central bank left the benchmark discount rate at 2% as expected at its last quarterly meeting in June, having hiked it to that level from 1.875% at the prior meeting in March.

Investors in Asia also have New Zealand GDP, unemployment figures from Australia and Hong Kong, and trade data from Malaysia on their plate on Thursday.

Traders may also be adjusting positions ahead of Japanese inflation figures and rate decisions on Friday from the Bank of Japan and People’s Bank of China.

The dark cloud of deflation hangs heavily over China, especially the property sector. Previous housing market crashes around the world suggest it could take China a decade to recover from the bubble currently bursting. And that’s if prices even get back to their pre-bubble peaks.

Here are key developments that could provide more direction to Asian markets on Thursday:

– Taiwan interest rate decision

– New Zealand GDP (Q2)

– Australia unemployment (August)

(Reporting by Jamie McGeever)

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