- US Federal Reserve to cut by 25bps; BOJ and ECB to extend pause.
- US 3Q GDP growth to remain over 3%.
- Hong Kong and Taiwan GDP growth likely slowed in 3Q.
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Central bank meetings
Bank of Japan (Oct 30): The BOJ is expected to keep the overnight call rate unchanged at 0.50% at its upcoming meeting, with a non-unanimous vote. At her inauguration press conference, newly appointed Prime Minister Sanae Takaichi emphasized the importance of close coordination between the BOJ and the government, while clarifying that there are no immediate plans to revise the existing BOJ-government joint statement. The implementation of specific monetary policy measures remains under the BOJ’s purview.
BOJ board members Hajime Takata and Naoki Tamura have recently reiterated their support for further rate hikes. In contrast, Governor Kazuo Ueda and Deputy Governor Shinichi Uchida continue to advocate a data-dependent approach and have refrained from signaling a definitive timeline for additional tightening.
On the data front, key wage indicators showed a slowdown in total wage growth to 1.5% yoy in August, with base wages holding steady at 2.1%—both still below the 3% threshold considered necessary for achieving sustainable 2% inflation.
Given these dynamics, we expect the BOJ to maintain its policy rate at this meeting but proceed with a 25bp rate hike at the December meeting, bringing the overnight rate to 0.75%.
European Central Bank (Oct 30): The ECB Governing Council is likely to signal limited urgency to lower rates, with growth and inflation in a state of equilibrium after eight rate reductions worth 200bp in this cycle. The benchmark rate is now below the US Fed as well as the UK BOE’s. Conviction stems from favourable developments since mid-year, including the US-EU trade deal, stable August inflation, firm 2Q and 3Q (estimated) growth numbers, uptick in bank lending activity and steady confidence indices. France, meanwhile, averted an immediate political crisis, although the fiscal overhang remains in place. PM Lecornu is expected to make budgetary concessions to win over the support of socialist MPs. In one such sign, reports suggest there were plans to suspend the controversial pension reform till after the 2027 elections. The draft budget unveiled earlier in the month outlined the need for EUR30bn fiscal adjustment to keep the 2026 budget deficit below 5% of GDP, via a combination of new revenues and spending cuts.
Forthcoming data releases
South Korea: The preliminary estimate for 3Q GDP is expected to show moderate yoy growth of 1.2%, improving from 0.6% in 2Q and flat growth in 1Q. Export growth accelerated in 3Q, driven by strong AI-related semiconductor demand, front-loading of trade ahead of tariff increases, and a favorable calendar effect from the Chuseok holiday. Consumption also picked up, supported by post-election sentiment recovery, a rally in the stock market, and the implementation of the supplementary budget.
That said, investment remained subdued. In particular, construction investment continued to decline sharply, reflecting ongoing weakness in property and land transactions.
Separately, President Trump's visit to South Korea around the APEC summit in Seoul will be closely watched this week. South Korea and the US are expected to sign a MOU, formalizing the reduction in reciprocal tariff rates to 15%, and providing more detailed guidance on South Korea’s USD 350bn investment in the US, including funding structure, profit-sharing mechanisms, and investment timelines.
Taiwan: The preliminary estimate for 3Q GDP is expected to show robust yoy growth of 6.0%, broadly in line with the 6.7% average recorded in the first half of the year. Export growth remained strong and stable in 3Q, supported by continued AI-related demand for GPUs, graphics cards, and servers, as well as front-loading of trade ahead of anticipated US tariffs. Machinery investment also stayed resilient, reflecting the strength in exports.
Consumption remained weak during the quarter, weighed down by softening labor market conditions—such as an increase in unpaid leave driven by tariff-related pressures on traditional industries, the ongoing correction in the property market, and delayed car purchases amid expectations of import tariff reductions.
In light of the stronger-than-expected performance in 3Q, we have recently revised our full-year GDP growth forecast upward to 5.6%.
Hong Kong: The economy is expected to slightly decelerate from 3.1%yoy in Q2 to 3.0%yoy in Q3, amid weaker net export growth. Import growth is projected to remain resilient at 13.1%yoy in 9M 2025, outpacing headline export growth. Retail sales have expanded for the fourth consecutive month, reflecting stronger domestic demand supported by both local consumption and tourism. On the external front, despite a year-on-year slowdown, exports are expected to stay resilient at 13.0%yoy in 9M 2025, driven by deepening trade links between China and non-U.S. markets. On the investment side, the rebound in HKD interest rates has dampened sentiment, with overall loan growth moderating from 1.5%yoy in July to 0.8% in August. Looking ahead, the Fed’s rate-cut cycle should bolster consumption and investment sentiment, supported by a softer HKD and lower borrowing costs.
Economics Team
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