Tightening cycles to be gradual

Central banks across the region have recently turned more hawkish. Over the past month or so, policymakers in Korea, Taiwan, Singapore, Sri Lanka, India and Pakistan have all tightened policy. Governor Benjamin Diokno in the Philippines has also hinted that the central bank there will raise interest rates soon, and we have adjusted our interest rate forecast. We now expect the BSP to hike rates by 50bps this year. The main concern in most places is inflation, which is now above target in around half of the countries covered by our Emerging Asia services. However, while headline rates have increased in recent months, inflation across the region remains much lower than elsewhere in the world. And unlike in other parts of the global economy, we expect inflation in Asia to drop back to target by the end of the year as base effects become more favourable. This supports our view that tightening cycles will be relatively gradual compared with other regions. Our interest rate forecasts are more dovish than the consensus and what is being priced in by financial markets. EM Drop-In (5^th May, 10:00 EDT/15:00 BST): Join Shilan Shah for our latest monthly session on the big macro and markets stories in EMs. This month, Shilan and the team will be talking Russian gas, FX weakness and surging food prices. Register now