Week Ahead for FX, Bonds : U.S. PCE Data, Bank of -2-

The RBA has already ruled out further interest-rate cuts and highlighted a persistent inflation problem that could worsen if last year's monetary accommodation isn't unwound.

The RBA is already concerned that trimmed mean inflation is above the 2%-to-3% target band at a time of recovering consumer spending and a broad pickup in growth. Any hints that labor supply is dwindling will add to the case for a nuanced tightening of rates next month.

In New Zealand, fourth-quarter inflation data due Friday will draw attention, though concerns about price pressures have taken a back seat due to growing optimism about an economic upswing. Interest-rate increases are unlikely in the near term as the economy absorbs spare capacity over the year ahead.

China

Another busy week lies ahead in China, with a heavy slate of economic indicators due Monday.

The main event is the GDP print for the final quarter of 2025, which will show if Beijing has managed to hit its annual target of around 5% growth. Given the strength of the past few months, most economists expect official data to be in line with the annual goal.

Economists in a Wall Street Journal poll expect China's economy to have grown 4.6% in the fourth quarter, slowing from 4.8% in the third quarter. However, DBS economists think nominal GDP growth is likely to improve alongside a gradual pickup in inflation, noting that CPI has remained positive for three consecutive months.

Mixed signals are likely to come from other key indicators due alongside GDP, including retail sales--a gauge of consumption--and industrial production figures. The WSJ poll tips December retail sales growth at 2.8% on year, versus 2.9% in November. Industrial production will likely have accelerated to 5.1% in December from 4.8% the prior month, while nonrural fixed-asset investment for the full 2025 is projected to decline 3%, a sharper contraction than 2024's 2.6% drop.

December's house-price index is also scheduled to drop on the same day. Markets will be hoping for some signs of stabilization in the property-market slump, which continues to sap consumer confidence and is a key obstacle in efforts to pivot the economy to more consumption-led growth.

Economists at ING doubt there will be much to cheer about, expecting data on property prices to show that the declines continued through year-end.

On Tuesday, the People's Bank of China is set to announce the latest one-year loan prime rate--the rate tied to the bulk of household and business loans--which is widely anticipated to remain unchanged.

DBS's economics team, led by chief economist Taimur Baig, expects the rate to stay at 3.00%, as economic growth is broadly in line with policymakers' targets.

"Looking ahead, we expect the PBOC to maintain a broadly neutral monetary policy stance," DBS economists said.

South Korea

The Bank of Korea will release fourth-quarter GDP data on Thursday. Growth is expected to have slowed in the October-December period after a stronger-than-expected rebound in the previous quarter, but to remain broadly consistent with the BOK's earlier annual growth estimate of 1.0% for 2025.

"Exports remained steady in the Oct-Dec period, supported by strong AI-related semiconductor demand, which helped offset tariff pressures," DBS analysts led by Baig said. "In contrast, consumption and investment slowed somewhat, reflecting the fading impact of earlier government support measures," they said.

DBS estimates GDP contracted 1.2% from the previous quarter and expanded 1.5% from a year earlier in the last three months of 2025, slower than the revised 1.3% on-quarter growth and 1.8% on-year growth in the third quarter.

In its November outlook, the BOK projected the economy would grow 1.8% in 2026 after an estimated 1.0% expansion in 2025.

Indonesia

Indonesia's central bank is likely to keep its policy rate unchanged at 4.75% amid renewed depreciation pressure on the rupiah, Barclays economists said. The currency has come under renewed pressure after the government disclosed that last year's fiscal deficit was kept slightly below the 3% legal ceiling.

Investor caution is unlikely to fade quickly, with Barclays expecting further rate cuts in June and December under its base-case scenario.

Malaysia

Malaysia is releasing its December trade and inflation data Tuesday afternoon. Headline inflation likely held steady at 1.4%, while core inflation might have temporarily jumped to 2.5% from 2.2% in November, driven by a drop in prices for "other" information and communications services, Barclays said.

December's export growth was likely damped by unfavorable base effects, despite sequential gains that helped widen the trade surplus, Barclays said. Malaysia's 2026 trade outlook could be upbeat, supported by easing tariff risks, diversified export markets, and resilient electrical and electronics shipments, RHB senior economist Chin Yee Sian said.

Separately, Malaysia's central bank will announce its policy decision Thursday afternoon. Bank Negara is expected to keep its policy rate unchanged at 2.75% given resilient growth and benign inflation, ANZ economist Jennifer Kusuma said. ANZ expects rates to remain on hold throughout 2026, though risks are skewed toward an earlier-than-expected reversal of the pre-emptive rate cut introduced in July.

Singapore

Singapore will release its consumer-price index for December on Friday. Headline inflation might come in around 1% on year in December, DBS economists said.

Price pressures continued to be driven by essential services, such as healthcare and public transport, and car-price increases. "These were partly mitigated by declines in retail goods and utilities prices, alongside manageable and relatively stable inflation across accommodation and food items," DBS said.

Any references to days are in local times.

Write to Jessica Fleetham at [e-mail] and Jihye Lee at [e-mail]

(END) Dow Jones Newswires

01-18-26 1614ET