By Devayani Sathyan

BENGALURU (Reuters) – Most Asian central banks are expected to reduce interest rates at a slower pace than the U.S. Federal Reserve over the coming year, according to Reuters polls. Solid economic growth has eased the pressure to maintain currency stability against a persistently strong dollar.

A significant 50 basis points Fed rate cut in September, along with anticipations for two additional quarter-percentage point reductions by the year's end, has given Asian central banks some flexibility in determining their next course of action.

The Fed is projected to decrease rates by an additional 125 basis points next year, which is significantly more than Asian counterparts. However, with the U.S. economy demonstrating ongoing resilience, the main risk is that the Fed could move more cautiously rather than expedite cuts.

As inflation remains broadly within Asian central bank targets and growth continues to perform well, there is little urgency for many banks to further reduce rates.

Radhika Rao, a senior economist at DBS in Singapore, commented, "Despite easing inflation at home, weak currencies have prevented policymakers from prematurely lowering rates to avoid further compression in rate differentials."

She added, "Each central bank is acting independently, and they will not match the Fed's movements directly."

Aside from the Indian rupee, which is being actively managed by the Reserve Bank of India, and the Chinese yuan, most Asian currencies have experienced losses this year ranging from 2-6% against the U.S. dollar.

Excluding the People's Bank of China (PBOC), seven of the eight major Asian central banks that modestly raised rates after the pandemic are projected to maintain their rates for the remainder of 2024 or reduce them by at most 25 basis points, according to Reuters polls conducted from October 1-29.

Only Bank Indonesia is forecasted to cut rates by another 50 basis points this year.

To date, only the Bank of Korea, Bank of Thailand, and Bank Indonesia have lowered rates by 25 basis points, while the Philippine central bank has reduced them by 50 basis points. The State Bank of Vietnam lowered rates in June 2023 and has maintained its position since.

Next year, only the Philippine central bank is expected to decrease rates by 100 basis points, while the others are likely to remain unchanged or reduce by a total of 50 basis points at most.

The PBOC is an exception; it recently announced its most aggressive monetary easing measures since the pandemic to stimulate its economy, which grew 4.5% last quarter compared to a year earlier, below the 5% growth target. Additionally, it has adjusted its key benchmark interest rate.

For most global economies where rates are declining, there is a risk they could drop lower than currently anticipated by economists, contributing to a positive global outlook.

Much will hinge on whether the Fed opts for a slower pace than expected.

Alicia Herrero Garcia, chief economist for Asia-Pacific at Natixis, noted, "We believe the main risk to our interest rate outlook for Asian central banks is the path of the Federal Reserve. If the Fed chooses to be cautious with rate cuts, it will result in a stronger dollar."

(Other stories from the October Reuters global economic poll)

(Polling by the Reuters Polls team in Bengaluru and bureaus in Beijing, Seoul, Bangkok, Manila, Jakarta, Taipei, and Kuala Lumpur; Editing by Ross Finley, Hari Kishan, and Ros Russell)