Week Ahead for FX, Bonds: U.S., European PMI Data -2-

Currency stability could give Indonesia’s central bank room to keep rates unchanged, but ING economists Deepali Bhargava and Lynn Song warn that inflation risks may limit how long it can pause. They expect Bank Indonesia to hold policy steady, citing recent stability in the exchange rate. While improved sentiment reduces the immediate pressure to raise rates, the broader balance-of-payments picture is said to be largely unchanged. The outlook is clouded by higher fuel prices and the severe El Niño, both of which could push domestic inflation. ING still expects a further 25-basis-point increase before year-end. In the Philippines, Goldman Sachs expects a 25-basis-point hike to 5.25% as September inflation accelerates.