JPMorgan: High oil prices may trigger tightening of Asian monetary policies

MarketWatch reports that on March 12, JPMorgan economists stated that persistently high oil prices could lead some Asian central banks to adopt a hawkish monetary policy stance. Recent surges in crude oil and natural gas prices have posed trade shocks to many economies in the region. They pointed out, “Across the region, fiscal policy is likely to be the first line of defense in buffering households from the impact.” They also noted that rising oil prices will increase the likelihood of tightening policies in Singapore and Malaysia, while reducing the chances of interest rate cuts in Indonesia and the Philippines. Their analysis suggests that whether the Bank of Korea will raise interest rates depends on whether the oil price-driven shocks persist and whether they are sufficient to influence inflation expectations and cause a second-round effect on core inflation. (Jin10)