Asia set to raise rates in 2018, but still lag Fed
Tighter monetary policy is coming to Asia in 2018. Yet it will lag the Federal Reserve's rate hikes as Asian central banks balance an exports-led revival in growth with a slowdown in regional locomotive China.
That will mark a shift from a few months ago when most economists expected Asian policy makers to hold their ground or even ease further, but the trade windfall behind a synchronized uptick in global growth is seen lasting longer.
Last week South Korea took advantage of the trade boom to normalise policy, lifting rates for the first time in more than six years, and analysts expect Malaysia and Philippines, where growth has also benefited from a surge in public investment -to hike in the first quarter.
With the benefit of hindsight when the Fed in 2013 signal edit was time to exit ultra-low rates and sparked a taper tantrum, regional central banks should be more confident of looking at the strength of their own economies rather than that of the United States.
"The last couple of years have shown us that monetary policy in this region can decouple from the US," said head of Asia research at ANZ.
"Obviously they are cognisant of what the Fed does and capital flows but this is not a case of central banks being forced to act just because the Fed is looking to tighten further."
That de-coupling has been on show in the past two years as Asia shrugged off four U.S. rate hikes, and some countries even cut rates over that period.
South Korea was the first major Asian economy to lift rates since Indonesia's November 2014 move, which was reversed three months later as markets eventually took the view that a US lift-off won't necessarily derail global growth.