Goldman Sachs axes Indonesia’s rate cut forecast

2026-03-24 - 05:00

Goldman Sachs Group Inc said inflation will likely climb by more than 1 percentage point in Thailand and the Philippines. (AFP pic) SINGAPORE: Goldman Sachs Group Inc dropped its call for monetary easing in Indonesia this year while adding interest-rate hikes for India and the Philippines as the US-Israeli war on Iran drives up energy prices and boosts inflation across Asia. Central banks in economies with less anchored inflation expectations, greater exchange-rate sensitivity and higher pass-through from fuel prices are more likely to tighten policy, prompting it to also bring forward further tightening in Singapore and add another rate increase in Australia, the economists wrote in a note today. “A large supply shock creates challenges for monetary policy,” Goldman said. “Risks to our new baseline are two-sided but still skewed in the direction of a larger, longer upside shock to energy prices,” it said. The report comes as energy markets have been thrown into turmoil by the Middle East conflict, with hostilities now in a fourth week. Goldman’s oil outlook assumes a near shutdown of Strait of Hormuz – which connects the Persian Gulf to global markets – through mid-April, pushing Brent to average US$105 in March and US$115 in April before easing to US$80 by the fourth quarter. “As a result, inflation will likely climb by more than 1 percentage point in Thailand and the Philippines,” the economists said, adding they see “near-zero” impact in China, Japan and South Korea due to energy subsidies. For the region as a whole, they see consumer prices rising by an average 0.6 percentage point, taking cumulative upgrades to just over 1 percentage point since the conflict began. The growth impact is uneven, Goldman said, as it sees negligible downgrades in China, Japan, South Korea and Taiwan while lowering forecasts by more than 0.5 percentage point for India, the Philippines, Thailand and Singapore. “Current account balances are also set to deteriorate across much of the region except in Australia and Malaysia,” Goldman economists said. They expect governments to loosen fiscal policy through subsidies and central banks to step up currency intervention to limit imported inflation.