Asia - Korea bucks the trend as Asia turns hawkish (Jun 08)

Recent actions by several Asian countries to limit the cost of fuel subsidies highlight the stresses that high oil prices are causing in emerging economies. India, Indonesia and Malaysia (as well as Taiwan) have each allowed administered fuel prices to rise in the last month. These moves will worsen inflation, which is already at multi-year highs across the region. Interest rates have risen this month in Indonesia and the Philippines and we now expect further upward moves in both countries, as well as in India and Malaysia. But we expect Korea to buck the regional trend as its central bank, which has a history of pre-emptive action, focuses on the weakening outlook for both business and consumer spending.