ASEAN-6: Differentiated tightening paths after energy shock – DBS

DBS Group Research economists Radhika Rao and Chua Han Teng assess how ASEAN-6 and India will respond to higher energy prices and renewed inflation pressures. They argue Singapore has already tightened via the SGD NEER band, while the Philippines and Vietnam may lead rate hikes, Indonesia and Malaysia stay in the middle, and Thailand and India move more gradually, with fiscal policy as the first line of defence.

Energy shock reshapes regional policy paths

"Against the backdrop of brewing Middle East tensions, ASEAN-6 and India’s central banks confront a familiar but intensified policy dilemma: how to respond to externally driven energy inflation without derailing domestic growth."

"To this end, the sequence of policy tightening risks amongst the ASEAN central banks will be dictated by the risk or scale of a pass through of higher oil & gas prices to domestic prices or risks of any cut in subsidies or fuel price increases, which will carry first and second order impact to price stability."

"The narrative across the rest of the region is considerably more differentiated, with the tightening sequence likely to play out as follows: a) Hawkish camp – should energy prices remain elevated, the Philippines and Vietnam are expected to lead the tightening cycle. b) Middle ground - Indonesia and Malaysia are in this camp. c) Gradualists – Thailand and India are unlikely to exhibit urgency in tightening policy."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)