Asia bucks the monetary policy trend

Several EM central banks have continued to tighten monetary policy over the past month or so in response to strong reopening rebounds (Chile, Czech Republic, Hungary) and/or rising inflation concerns (Brazil, Mexico, Peru, Russia). A few others, including Colombia, are likely to follow suit relatively soon. But one EM region that is bucking the monetary policy trend is Asia. Admittedly, the Bank of Korea may be gearing up to tighten policy soon too in response to building financial risks. But the surge in virus cases and low (or easing) inflation means that most central banks in the region are in no rush to tighten. In fact, we now expect further rate cuts in both Thailand and the Philippines over the coming months, while the Reserve Bank of India is unlikely to start normalising policy until well into next year.