[Feature Photo: (L-R) SKB Institute Director, Prof Dave Fernandez, and Principal Research Associate, Tom Lam at the IMF-World Bank Annual Meetings in Bali, Indonesia.]


SKB Institute Director, Prof Dave Fernandez, and Principal Research Associate, Tom Lam, attended the IMF-World Bank Annual Meetings in Bali, Indonesia. The Annual Meetings are a flagship event for a broad spectrum of global participants, from central bankers to private sector representatives, to discuss global challenges.  The meetings are routinely held in the US (Washington, DC) for two successive years, but rotate to another member country in the third year.  Singapore and Tokyo were the two Asian cities that hosted the meetings in 2006 and 2012, respectively. 


Some of the dominant themes from the conference include the future path of Federal Reserve (Fed) rate hikes and their impact on global markets, ongoing trade tensions between the US and China, lingering uncertainty in Italy, structural headwinds and tailwinds in Asia and the direction of oil prices. 


Tom Lam interacted with central bank officials from the US and emerging markets, including a representative from the Bank for International Settlements.  Notwithstanding the uncertainty in equity markets recently, the general takeaway from Tom’s interaction with Fed officials was that the current market environment is generally “okay” and manageable.  But policymakers also acknowledged that the prolonged period of hand-holding by the Fed thus far would increasingly be less likely going forward. 


While financial markets are still leaning toward one more rate hike in December, essentially totaling four 25 basis points rate increases in 2018, the market pricing for 2019 has been less aggressive.  Many Wall Street forecasters have been expecting three to four rate increases next year, with the latest Federal Open Market Committee median “dot plot” highlighting three moves.  But Tom’s view is that the market might be closer to reality, with the possibility of only a couple of rate hikes in 2019.  Although Tom does not anticipate inflation to be a problem in 2019, risk management considerations might compel the Fed to lengthen the gradual tightening cycle.  


Prof Dave presented his view on financial stability and risks in Asia to a group of about 200 emerging markets (EM) investors at a conference hosted by JPMorgan. Other presenters on the same panel were the Chief Economist of the European Stability Mechanism and the former Board Member of the Deutsche Bundesbank, who both focused on Europe. With respect to our region, Prof Dave observed that EM Asia asset prices had taken a beating in recent months and may have overshot, relative to fundamentals.


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