Asia-Pacific monetary policy will diverge in 2022: report | financial markets

South Korea and New Zealand are expected to raise interest rates next year, while emerging economies will maintain loose policies.

A new report shows that as rich countries raise interest rates to combat inflation and emerging economies keep interest rates low, monetary policy in the Asia-Pacific region will continue to diverge next year.

The central banks of South Korea and New Zealand may tighten policies after 2022 due to inflation concerns Raise interest rates twice this yearAccording to a research brief released by the Oxford Economics on Wednesday.

The Oxford Economics Institute predicts that the Reserve Bank of New Zealand will raise the benchmark interest rate by 125 basis points to 2.25%, and the Bank of Korea will announce two interest rate hikes of 25 basis points, bringing the policy interest rate to 1.5%.

The Reserve Bank of India is also expected to raise the policy rate by 25 basis points to 4% in the first quarter.

“The new Omicron variant increases the risk surrounding the outlook for monetary policy. If the variant restrains demand more than it exacerbates supply chain disruption, it may lead to deflation,” Sian Fenner, Asia’s chief economist, said in a briefing .

“But the reverse is also true. As a result, we see that most central banks prioritize growth rather than transfer policy materials.”

As GDP is still 4-6% below pre-pandemic levels, Southeast Asian economies, including Malaysia, Thailand, and the Philippines, are considered unlikely to raise interest rates before 2023.

‘New life recovery’

Indonesia is expected to consider raising interest rates after the Fed raises interest rates, and this is expected to be September 2022.

“We predict that core and overall inflation will show an upward trend in 2022, but we still expect inflation to be lower than the central bank’s mid-term inflation target on average,” Fenner said. “Therefore, the central bank has room to give priority to supporting its nascent recovery.”

The briefing stated that after China adopted easing policies this year to boost weak economic growth, it is considered unlikely to raise interest rates in 2022 because the authorities are “still keen to control financial risks and leverage.”

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