With the Federal Reserve and the European Central Bank having already eased policy, some economists say they are running out of ammunition.
“The West really has no scope to ease anymore,” Robert Prior-Wandesforde, Credit Suisse’s Head of India and South East Asia Economics told CNBC. “And the biggest worry would be that Asian central banks would be a bit reluctant to cut fiscal policy because they eased too much in the previous crisis.”
China is perhaps the best example, where authorities massively cut interest rates and eased policy in 2008, causing a property price bubble that they are now trying to deflate, Prior-Wandesforde added.
Vishnu Varathan, Mizuho Corporate Bank’s Regional Economist in Singapore, said central banks should not be too ‘hawkish’ about cutting rates because inflation has come off previous highs.
“Even if growth in the region is still fairly healthy, it is below-trend in most places,” he wrote in a report in April. “And despite upside risks from oil, inflation is generally well-behaved.”
P K Basu, Maybank Kim Eng's Regional Head of Hesearch and Economics, agrees, adding that investors looking for more Fed action will likely be disappointed and that they should look to Asian central banks instead.Page 2 of 3 | Prev Page | Next Page