As countries in Southeast Asia began gradually lifting strict curbs on movement and business activity from last year, central banks in the region were expected to start down the path of normalising their key policy rates to keep in line with anticipated rate hikes by the US Federal Reserve. Most central banks around the world would adjust their key policy...
A man wearing a protective mask crosses a street in front of Petronas Twin Towers, amid the coronavirus disease outbreak in Kuala Lumpur, Malaysia, on Aug 11, 2020.As countries in Southeast Asia began gradually lifting strict curbs on movement and business activity from last year, central banks in the region were expected to start down the path of normalising their key policy rates to keep in line with anticipated rate hikes by the US Federal Reserve.
“Nobody expected a spike in oil prices, nobody realised Ukraine and Russia combined contributed to 30 per cent of global wheat production,” Fung Siu, principal economist with The Economist Intelligence Unit, told This Week in Asia . “Animal feed production was especially affected. Already markets were quite tight, they were made tighter by the war.”
“The Fed is so behind the curve that they realise they have to get with the curve. They understand that once inflation becomes entrenched, it’s very difficult to squeeze it out of the economy,” Fung said. The Asean-5 – the five largest economies in the 10-member grouping – have either already raised their key rates or implemented some other measures in a bid to hold down inflation, according to Brian Tan, senior regional economist with Barclays.
Tan said they do not expect the US to enter a recession, though he acknowledged that it remains a risk, especially with headwinds tilted towards higher inflation rather than lower growth. Countries in the Asean-5 will face different challenges should a recession hit, with Singapore, Malaysia and Thailand likely to be the worst hit due to their dependence on exports, said David Mann, chief economist for the Asia-Pacific, Middle East and Africa with the Mastercard Economics Institute.