OCBC Bank: Asian central banks still have some room to respond to stagflation risks

Golden Ten Data reported on March 25 that economists at OCBC Bank said the Middle East crisis is shifting the interest rate trajectories in some parts of Asia. Analyst Lavanya Venkateswaran stated that central banks which previously leaned towards further (albeit limited) monetary policy easing—such as the central banks of Thailand, the Philippines, and India—will no longer consider rate cuts. In addition, OCBC Bank has withdrawn its expectation of a 50 basis point rate cut by Bank Indonesia and now expects the country to keep rates unchanged until 2026. In some regions, the possibility of rate hikes is rising, though this largely depends on how long and to what extent energy prices continue to rise. As policy interest rates in most parts of the region are at or near neutral levels, Venkateswaran believes that policymakers can afford to wait and observe. This allows them to guard against stagflation risks, which were less significant during the shocks in 2022, given that inflation was higher at that time and policy rates were not at historical lows.