Asian Central Banks Unlikely to Reverse Hikes Amid El Niño Price Pressures

According to Gareth Leather, senior Asia economist at Capital Economics, Asian central banks are unlikely to hastily reverse recent rate hikes on July 7, citing rising food price risks from El Niño phenomena. While central banks responded aggressively to earlier energy price surges with at least one rate increase each, subsequent energy price declines reduced urgency for further tightening. However, El Niño could sustain caution, as food carries greater weight than energy in Asian consumer price baskets. Capital Economics expects India, Pakistan, and South Korea to pursue additional monetary policy tightening in coming months.
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