Beware higher volatility as US election nears

THIS column said in June that rate cuts by the US Federal Reserve could mark an inflection point of sorts for markets in Asia, as they would take pressure off regional currencies and pave the way for a broad loosening of monetary policy that supports economic activity and boosts asset prices.

As it happened, right after the Fed announced its 50-basis-point rate cut on Sep 18, Hong Kong’s central bank announced a 50-basis-point cut of its own. Just hours before the Fed moved, Indonesia’s central bank also announced a 25-basis-point cut.

The central banks of Thailand and the Philippines both announced rate cuts earlier this month. This was Thailand’s first cut since 2020, and the Philippines’ second cut since August.