The spike in energy prices has already caused Turkey’s central bank to tighten monetary policy and Pakistan may not be far behind. Most other central banks will be more reluctant to tighten but those in Indonesia, the Philippines, Mexico and parts of Central Europe could eventually do so if the price spike is sustained. In other Asian economies, low inflation gives central banks more room to look through the rise in energy prices. And a few central banks – Brazil, Thailand – could still cut absent a severe and long-lasting energy price shock.
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