Fed Rate Cuts 'Will Definitely Help' Asian Central Banks, Morgan Stanley's Ahya Says

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00:00Does that affect in any way how you look at Asian central banks, whether or not they will move further or quicker?

00:07No, I think if the Fed stays on the path of cutting interest rates, that does help Asian central banks

00:12because we do think that bulk of the rate cuts that we needed in Asia have been already implemented.

00:20But there are a few central banks which will do one or two more rate cuts, and the Fed rate cuts will definitely help Asia.

00:27And just on, you're saying cuts, so that implies multiples, what's your expectation going into end of this year,

00:34but early next year as well? The stage is set, it seems, for further easing.

00:39For Asia?

00:40For the U.S. just to then lead into Asia.

00:42For the U.S., our U.S. team has taken out the December cut.

00:48Of course, things are changing, and so we will see eventually what happens.

00:52But more importantly, we are still looking for three more rate cuts from the Fed in 2026.

00:58We're wrapping up the year, and most, if not all, economies are doing better than most people had expected at the start of the year.

01:07Is there a lot of momentum going into next year in terms of the growth outlook for the region?

01:11For the growth outlook for the region, I think so far, actually, we've seen a proper deceleration in growth,

01:17because what we've seen in Asia in 2025 is some kind of a K-shaped recovery.

01:23Okay, that's the caveat.

01:24The trade does matter for the region, and trade has been good only in tech.

01:30If you look at non-tech exports for the region in all, for the whole region, but even for China and almost every economy,

01:39growth has been just like 1% cumulatively.

01:43Let's call it, it's been flat.

01:440% kind of growth rates for non-tech segment.

01:48And tech, it's great for markets, and I appreciate that.

01:52But from an economic standpoint, tech sector doesn't create many jobs.

01:57So you don't have a big multiplier effect.

01:59And so the non-tech sector being in a bad shape has affected the labor markets, wage growth, retail sales,

02:07and the overall numbers are that of showing a deceleration over the last four quarters.

02:13But we think this is all about to change.

02:16As the Fed rate cuts come through, and with a lag effect that helps the U.S. domestic demand to improve,

02:22we are expecting that Asia's non-tech exports will improve from early next year.

02:30And also the trade tensions, which had been the key reason why it was a bad situation for non-tech exports,

02:37is now finally, we can say that it's behind us.

02:41A bulk of the trade tension is behind us.

02:43So both those factors, U.S. domestic demand improvement, as well as the trade tensions being behind us,

02:48should help that non-tech exports recovery for the region next year.