The central banks of New Zealand, the Philippines and Malaysia all tightened monetary policy last month amid signs that policymakers are becoming increasingly concerned that loose monetary policy is helping to fuel asset bubbles, especially in the property sector. Looking ahead, although we expect all three central banks to tighten monetary policy again before the end of the year, we don’t expect to see any other Asian central banks hike interest rates in 2014. Subdued growth in Indonesia, Australia, Thailand and Taiwan means policymakers will look to keep monetary policy on hold, while falling inflation is likely to open the door to rate cuts in India. There is speculation that the Korean central bank may even cut rates following a sharp slowdown in the economy last quarter. However, provided growth rebounds as we expect in the second half of the year, the Bank of Korea will probably keep interest rates unchanged for the remainder of the year.
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