The emerging Asia economies have picked up speed, inflation has increased, and more central banks have indicated that monetary policy needs to be tightened. By the end of April we expect that rates will have moved up in Vietnam and India, and possibly in Thailand if political tensions calm down. But we continue to expect that most Asian policymakers will strike the right balance. The tightening should be enough to curb inflation without being so severe that it chokes off economic growth. The global backdrop will darken during the course of 2010 but private-sector spending and policy flexibility should ensure that any impact on Asia (ex-Japan) is small. Stocks and currencies will probably rise further, while Asian government bonds are likely to struggle.
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