Thursday: Eyes turn to BoJ, ECB after Fed call

0:00While climbs and stocks fall as Persian golf facilities are hit, Australia's jobs market likely remain tight in February and attention now turns to the back of Japan and the ECB after the Fed's rate decision as this podcast goes to air. That's coming up in our five things in five minutes on Thursday, March the 19th. And then in our deep dive interview, ANZ economist Vicky Schaujo analyzes how exposed Asia's economies are to oil and LNG from the Middle East. This energy crisis serves as a wake-up call for many Asian economies. But first in five and five with ANZ, the US Federal Reserve is announcing its March rate decision as this podcast goes to air, with all eyes on how the FOMC will view the impact of the Middle East conflict on inflation and growth. But the Fed isn't the only G3 Central Bank making a decision this week with the Bank of Japan and European Central Bank having caused today. ANZ economist Ponzi Madhavani is expecting a hawkish hold from the Bank of Japan.

1:04These are supply side shogs that are driving up inflation. So Bank of Japan will be very careful in assessing them. Ideally, they would want demand-driven pressures and then they respond to demand-driven pressures. I think spring-wage negotiations are underway. So Bank of Japan will want to await outcome of it as an indicator of what underlying wage pressures are in the economy. So for this meeting, we think that the Bank of Japan might signal that it is prepared to adjust interest rates, that it is watching exchange rate developments, and our baseline forecast is that the Bank of Japan will hike by 25 basis points at its April meeting. A head of the Fed decision at 4 a.m. Sydney Melbourne time, the S&P 500 was down 0.6% and Nasdaq down 0.7%. The Dow fell 0.9%. The US 10-year yield rose 2.5 basis points to 4.226%, West Texas intermediate futures were up 1.2% at $96.68 US barrel, and Brent Crude was up 4.5% at $108 US barrel, as Persian Gulf energy facilities were hit. Gold was down 2.4% at $4886 US dollars announced. The US dollar index up 0.3%

2:12the Aussie dollar down 0.4% at $70.76 US cents while the Kiwi was down 0.3% at $58.39 US cents. Number two, Bunse says ANZ research expects the ECB to keep rates on hold for the rest of this year. To be fair, financial markets are now pricing in more than one hike from the ECB this year, but we don't think conditions are supporting that just yet. There are strong headwinds to growth outlook in the region given higher energy prices, so it's very hard to conceive that the ECB in such an event will respond by hiking, but they can at this stage they can't also be complacent about inflation pressures coming out of that. Number three, the euro is down 0.3% against the dollar this morning, but it's still trading 0.35% higher over the past five days. ANZ FX strategist, Precious Jane, says the rate decision itself will not be a major driver for the common currency. We see focus will be on ECB's economic projections at this meeting. As euro is a net energy importer, rising energy prices are crucial for the economy and from an FX perspective euro remains sensitive to policy rate expectations,

3:17so we will be closely looking at ECB's inflation projections and commentary to gauge any changes to rate expectations. Number four, Australia's February jobs report out today will show just how much inflationary pressure the RBA is under from the labour market. ANZ economist Aaron Luck is expecting unemployment to stay at 4.1% and employment growth of about 40,000 for the month. We have seen our ANZ in the job ads picking up for the last two months and actually at the highest level since October 2024 as well, so that would normally translate to a solid increase in employment. We also know that was an elevated number of people waiting to start work in January. There was an article from the ABS telling us that so there was a chance that they could begin working in February and that should potentially add to employment growth as well. Now I think finally if the unemployment rate does print in line with our expectations, that would actually be the third consecutive month that the unemployment rate prints at a low 4.1% and that would probably reinforce to RBA's view that the labour market has tightened a little recently as well. Number five, also out today, is New Zealand economic growth data for the fourth

4:20quarter of 2025. ANZ's senior economist Met Gold says key partial indicators were underwhelming in recent weeks. The construction data was disappointing for the manufacturing data that underwhelming and then some services started as well like wholesale trade and professional services weren't as strong as we might have expected. So taking all that into account, we've revised down our GDP forecast for Q4 from 0.7 to 0.2% which is relatively low but does come off a 1.1% last quarter, so if you look at the second half of 2025 as a whole, there was still something over recovery even I thought was pretty modest. Met Gold there. Now in our deep dive interview, ANZ economist Vicky Scharger looks at how the oil shock coming out of the Middle East would affect Asia's economies. Asia's heavy dependence on the Middle East energy stems from geographic proximity as well as structurally rising demand. Rapid industrialization and urbanization have increased Asia's crude oil imports by 91% from 2010 to 2023, while Europe decreased its crude oil

5:28imports by 10% in the same period. By 2023, that crude oil imports made up 79% of Asia's total supply, highlighting the significant external dependence. So will the effect of the Middle East conflict be similar across Asian economies? The impact on Asian economies is uneven. For energy exporting countries such as Malaysia and Indonesia, the direct impact is likely to be limited. For China, its energy self-sufficient rate has reached 84.4% in 2025, while China is not immune to energy shocks from disruptions in the Middle East. It's domestic energy capacity that specified the energy mix and possible alternative energy source leave it in a better position. Other East Asian economies such as South Korea and Taiwan are more exposed. Around 60% of their primary energy supply comes from oil and gas. South Korea sourced about 70% of its crude oil imports

6:33from the Middle East. However, the vulnerability is partially mitigated in the short term by substantial strategic oil reserve, which is equivalent to about 208 days of consumptions according to the South Korean officials, which can help cushion immediately supply disruptions or delays. Taiwan is experiencing heightened pressure regarding its gas supply. LNG constitutes around one quarter of Taiwan's primary energy mix and current reserves are reported to cover only 11 days of consumption. South East Asian vulnerabilities stems from a combination of factors, such as high oil and gas dependency, supply concentration, and inefficient reserves. Talent is among the most vulnerable energy importers in Asia, holding the region's largest negative energy trade balance at 6% of its GDP. The country relies on oil and gas for about 80%

7:40of its primary energy needs, with 60% and 28% of its oil and natural gas supply potentially affected by the ongoing conflict in the Middle East. And what are governments doing in the face of these vulnerabilities? Governments around Asia have quickly responded to the challenge. For example, on the supply side, Made in China and the Thailand have posed few exports. South Korea, Vietnam, Taiwan and Thailand emphasize efforts to preserve price stability, meanwhile the Philippine government prioritized demand-side action to manage energy consumption. If the crisis continues, there is growing concern that stricter usage restrictions will be imposed across the board, ultimately impacting economic activities and causing a slowdown in the region. This energy crisis serves as a wake-up call for many Asian economies that remain

8:40heavily dependent on the Gulf region. First, it injects new urgency into the energy transformation agenda, reinforcing the need to reduce structural reliance on fossil fuels and accelerating the development of renewables. Second, it strengthens the case for diversifying energy source both geographically and across field types to mitigate concentration risk. However, this transition will be challenging. Renewable capacity expansion takes time and requires substantial upfront investment, greed of grades and a storage resolution. Asia's ability to quickly reduce exposure to the energy shocks remain limited. This podcast contains general information only, not investment advice. You should obtain

9:41advice for your personal circumstances before making any investment decisions. Please view the podcast disclaimer available via your media player or e-mail.