A sharp deterioration in the growth outlook, coupled with further falls in oil and food prices, has caused policymakers in the region to grow more concerned about inflation undershooting, rather than overshooting targets. Admittedly, concerns about the downside risks to currencies persist and it remains the case that rate cuts are unlikely to keep pace with the ECB. But it seems that currency markets are now being driven primarily by fluctuations in global risk appetite rather than local interest rates. Accordingly, sizeable rate cuts are possible over the next six months.