FILE PHOTO: The logo for Goldman Sachs is seen on the trading floor at the New York Stock Exchange (NYSE) in New York City, New York, U.S., November 17, 2021. REUTERS/Andrew Kelly/File Photo
SEOUL: Asia’s central banks will proceed cautiously with further policy easing given strength in the greenback and the risk of Trump administration tariffs, according to Goldman Sachs Group Inc.
The Wall Street lender sees the Bank of Korea holding fire on a further reduction to interest rates this week, said Andrew Tilton, the firm’s chief Asia Pacific economist.
Already last week, officials in Indonesia warned of less scope for lowering borrowing costs due to US political developments.
“With tariffs potentially coming and with the US dollar near a multi-decade high, we think that pace of cuts is going to be quite slow,” he told Bloomberg Television.
“I think the US dollar really matters as well because exchange rates and exchange rate stability is so important for Asian central banks.”
US President-elect Donald Trump has threatened 60% tariffs on China.
Early cabinet appointments, including China hawks Marco Rubio as secretary of state and Mike Waltz as national security advisor, suggest he is readying an adversarial stance.
In Beijing, “policymakers may want to keep the yuan relatively stable for now but potentially could weaken” in the first half of the next year if tariffs get imposed, Tilton said. He sees China’s yuan slipping to roughly 7.50 per US dollar. — Bloomberg
