Summary
-
Nomura sees Asia’s easing cycle largely complete despite low inflation
-
A north–south monetary policy divide is emerging across the region
-
Korea, Australia, New Zealand and Malaysia seen holding or hiking rates
-
Residual rate cuts expected in India, ASEAN economies and China
-
Risks skewed to global growth, trade tensions and AI-related volatility
Asian monetary policy is entering a more fragmented phase, with a growing divide emerging between northern and southern economies, according to Nomura.
In a recent note, Nomura argues that the easing cycle across much of Asia is now largely complete, despite inflation remaining relatively subdued in many economies. The bank says improving growth dynamics, policy rates close to neutral and a desire among central banks to preserve policy ammunition have encouraged a more cautious stance. Financial stability concerns, particularly rising housing prices, are also limiting the scope for further rate cuts in parts of the region.
This cautious posture contrasts with expectations in the United States, where Nomura’s U.S. economics team continues to forecast two Federal Reserve rate cuts in 2026. As a result, the bank suggests Asia could increasingly decouple on the hawkish side relative to the U.S.
Within the region, Nomura identifies a policy split. In South Korea, New Zealand, Australia and Malaysia Nomura says the easing cycle is seen as over, reflecting stronger growth momentum. Nomura expects Bank Negara Malaysia to raise rates in the fourth quarter of 2026, pre-empting a build-up in financial stability risks, while the Reserve Bank of New Zealand is forecast to resume rate hikes in 2027.
Japan stands somewhat apart. Nomura expects just one more rate hike from the Bank of Japan in December 2025, followed by a prolonged pause through 2026 as core inflation gradually slips back below the 2% target.
By contrast, other Asian economies are expected to retain an easing bias. Nomura forecasts additional rate cuts in India, Thailand, Indonesia and the Philippines, citing a combination of softer growth and muted inflation pressures. In China, the bank expects a modest 10-basis-point policy rate cut, but sees fiscal policy doing more of the heavy lifting from around spring 2026, particularly via increased lending by policy banks to local governments.
Nomura highlights faster global growth and stronger Chinese domestic demand as key upside risks, while warning that weaker U.S. demand, renewed trade tensions or a sharp correction in AI-related investment could derail the outlook.
