Inflation has risen further as food and fuel prices remain high and strong growth has left little spare capacity in many economies across the region. Policy interest rates will move up further, but the tightening cycles should stop with rates at levels that do not inflict serious damage on growth. Capital inflows have increasingly poured into the region, while currencies have appreciated against the US dollar. There is scope for more currency appreciation to lower import costs and help in the fight against inflation, without materially affecting exports.
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