Asia joins the EM rate hike club

Upside surprises to inflation coupled with a hawkish Fed have prompted aggressive monetary policy responses by central banks across the emerging world over the past month. Policymakers in Czechia, Romania, Chile and Egypt raised interest rates by more than expected while Mexico’s central bank appears to be shifting its tightening cycle into a higher gear. Meanwhile, a handful of Asian central banks kicked off their tightening cycles, with India, Malaysia and the Philippines raising interest rates. Looking ahead, we think tightening cycles in Emerging Europe and Latin America have a bit further to run, while policy normalisation in Asia is likely to be gradual. The key exception is China where policy is likely to be loosened a bit further, although a renewed round of large-scale stimulus seems off the cards. LatAm Drop-In (26th May, 10:00 ET/15:00 BST): Join our 20-minute briefing about Colombia’s election and other regional political and fiscal risks – including Lula vs Bolsonaro in October. Register here.