The last two months have seen a noteworthy change in the monetary policy stance across the region. India, Indonesia and the Philippines joined the club of monetary tightening central banks (the hawks), following South Korea, Malaysia, Singapore and China (the latter tightened mainly through regulation). Downward pressures on the currencies, the risk of capital outflows and signs of higher inflation in a context of rising interest rates in the U.S. were among the reasons. Who will be the next to move? In China, the latest PBoC move (RRR cut of 50bp) indicates a pause in the tightening cycle as trade tensions escalate. Australia could be the next to move (+25bp expected by end 2018) as inflation is close to target (1.9% y/y in Q1 2018) and growth is relatively robust. Gradual policy normalization could help reduce risks associated with high households debt.
