Rising Oil Prices May Prompt Hawkish Shift in Asian Central Banks

JPMorgan economists have indicated that persistently high oil prices could lead some Asian central banks to adopt a more hawkish monetary policy stance. According to Jin10, the recent surge in crude oil and natural gas prices has posed a trade shock to many economies in the region. They noted that fiscal policy is likely to be the first line of defense to cushion the impact on households across the region. The economists suggested that the increase in oil prices raises the likelihood of policy tightening in Singapore and Malaysia, while reducing the chances of rate cuts in Indonesia and the Philippines. They further analyzed that whether the Bank of Korea will raise rates depends on the persistence of the oil price-driven shock and its potential to influence inflation expectations and cause second-round effects on core inflation.