Asian interest rates close to peaking (Sep 08)

The recent pullback in oil prices – and commodity prices more generally – has encouraged most Asian central banks (ex. China & Japan) to reorient their policy priorities back towards supporting growth. Indeed, the latest CPI data suggest that inflation has peaked across all economies surveyed in this publication, with the exceptions of the Philippines and possibly India. Robust exports have so far shielded the region as a whole from a more dramatic downturn in growth. But with the outlook for the global economy worsening and high inflation continuing to erode real incomes, we expect H2 growth to be significantly lower than in H1. Meanwhile, political instability adds to the downside risks in both Thailand and Malaysia.