Asian central banks seen to keep key rates

MANILA, Philippines - Central banks in Asia, including the Philippines, are expected to maintain key policy rates amid uncertainties brought about by the partial shutdown of the US government and the pending deadline to raise the US debt limit.

“Asia’s policymakers are concerned over negative spillover from the US fiscal impasse,” UK-based Barclays said in its Emerging Markets Weekly report.

Barclays noted the region’s central banks are in a “wait-and-see” mode as they await developments on US Congress’ efforts to raise the debt ceiling.

The US Congress has until Oct. 17 to increase the country’s debt limit. If it fails to do so, the country will have no funds to refinance or pay back its debts and analysts have said this crisis will be worse than the collapse of investment house Lehman Brothers Holdings Inc. in 2008.

Aside from the debt ceiling, Barclays noted the partial shutdown of the US government which began Sept. 30 is also a main concern for the region.

“Policymakers in Asia this week warned about the impact of the US government shutdown,” Barclays said.

The ongoing shutdown and the race to avert a US default add to current market volatilities as a number of Asian economies are heavily dependent on exports.

“Bank Indonesia specifically noted the risk to the country’s export outlook from the US uncertainty. (Meanwhile,) Korea’s finance ministry wrote in its monthly economic report that the US fiscal situation is a key risk for the Korean economy that is in a nascent, export-led recovery,” Barclays said.

At the same time, economies in the region have noted a possible US default may likely weigh down global growth anew, Barclays said.

“In its statement, the BoK (Bank of Korea) said the US fiscal impasse is a key downside risk to the modest global recovery. [Moreover,] at the APEC summit this week, leaders from China, Japan and Singapore urged the US government to address the fiscal uncertainties quickly,” Barclays said.