With inflation easing and domestic demand struggling in much of emerging Asia, central banks are likely to start cutting interest rates soon. The one remaining concern for policymakers is the fear of further falls in their currencies. But this worry should soon start to dissipate if, as we anticipate, rate cuts by the US Federal Reserve lead to a weakening in the US dollar. We expect central banks across Asia to start cutting interest rates from June, sooner than the consensus and financial markets currently expect.
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