Interest rate cuts to be exception rather than rule

Expectations that the fall in oil prices will trigger a wave of interest rate cuts across Asia are probably wide of the mark. Admittedly, Pakistan, India and Singapore have each loosened monetary policy this month. In each case though, loosening had seemed likely in early 2015 for some time. At most, lower oil prices may have encouraged policymakers there to act sooner. Elsewhere, policymakers will be aware that cheaper oil should ultimately boost real demand and so are likely to “look through” the immediate fall in inflation. In many places, policymakers will also have one eye on risks in the banking sector, amid continued worries over the unsustainable pace of credit growth.