Interest rates and inflation to remain low

Growth in China will weaken further over the coming year as a downturn deepens in industry and construction. The outlook for the rest of the region is improving. We expect many economies to rebound strongly as governments ease restrictions on the back of faster vaccine rollouts and success reining in COVID outbreaks. Central banks – unlike in much of the emerging world – are in little rush to tighten. Inflation hasn’t emerged as a concern and, with large output gaps set to keep a lid on price pressures, we expect policy rates in most countries to remain on hold over the coming year. In contrast, the consensus and financial markets are expecting central banks to begin tightening in 2022.