As inflation haunts the US and Europe, rate hikes loom. Will Asia follow suit?

Western economies face a perfect storm of surging consumer demand coupled with a lack of workers, choking supply lines and soaring energy prices

That has the region’s central bankers rethinking ultra-easy monetary policies. But in Asia – while New Zealand, Singapore and South Korea have shown signs of tightening – the wider sentiment is to stay put

4-MIN READ4-MIN

A tricycle driver gets his vehicle filled at a Caltex petrol station in Quezon City, Metro Manila. The Philippines is facing above-target inflation and calls to hike rates. Photo: Reuters

Published: 8:00am, 21 Oct 2021Updated: 9:58pm, 21 Oct 2021

Is monetary policy tightening on the cards in Asia?

That’s the big question in the market this week amid signals that central bankers in the West may scale back their ultra-easy monetary policies sooner than expected to calm anxieties over inflation.

Soaring prices have haunted investors in the West for much of the year, with concerns heightening in recent weeks.

Across Europe and in the United States, policymakers are confronting a perfect storm of surging consumer demand as Covid-19 restrictions are eased, coupled with various supply side issues – such as companies struggling to find workers, supply lines choking and energy prices soaring.

In Britain, the central bank chief Andrew Bailey signalled over the weekend that an interest rate hike might now be imminent to deal with inflation, even though he said just last month that “price pressure will be transient”.

Speaking to an online panel of central bankers on Sunday, the Bank of England governor said the global surge in power costs meant inflation would remain high for a longer period.