This week’s economic analysis highlights central bank actions across Asia as they respond to rising inflation driven by oil prices. Since the beginning of the year, many central banks in the region have raised interest rates while the Bank of Thailand remains an outlier after cutting rates earlier this year.

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In Indonesia, Bank Indonesia (BI) held its benchmark rate at 5.75% but increased its deposit facility rate and decreased reserve requirements to stabilize the economy. Despite these measures, Indonesian financial assets continue to face challenges, exacerbated by potential downgrades from MSCI that could lead to significant outflows.

The Bank of Korea (BoK) maintained its policy rate at 3.00% following increases in July and August, with many analysts anticipating further adjustments in November. While inflation remains above the target, much of it is imported, and growth is primarily driven by exports, raising questions about the BoK's ability to tighten further without harming economic stability.

In the Philippines, the Bangko Sentral ng Pilipinas (BSP) raised its interest rate by 50 basis points to 5.50% amid rising inflation, which reached 7.2% year-over-year as of September. The significant rise in energy prices and a weakening peso are contributing to the inflationary pressures, alongside ongoing challenges in maintaining economic growth, which was just 2.3% year-over-year in Q2 2026.

Looking ahead, key central bank meetings are scheduled this week, including decisions from the Federal Reserve, European Central Bank, and Bank of Japan (BoJ). The BoJ is expected to hold rates steady at 1.25% before potentially raising them in December, as wage growth and positive business sentiment provide some cushion despite declines in household spending.

Thailand's central bank will also decide on rates this week, having cut to 1.00% earlier this year in response to a sluggish economy, characterized by high household debt and tourism challenges. The current economic environment reveals that Thailand's recovery post-pandemic has been slower compared to its regional counterparts, with the real GDP growth below pre-pandemic levels.