APAC | Why we see higher - but not runaway - inflation

The heady cocktail of stronger global recovery prospects, surging prices for crude oil and other commodities, supply-side disruptions, and rising container shipping costs has fuelled concerns of rising inflation. This has sparked a sell-off in global bonds in recent weeks, from which Asia has not emerged unscathed.

What you will learn from this report:

  • In the near term, supply-side disruptions will likely add to the upward pressures from recovering demand and rising commodity prices.
  • A sizeable output gap, a higher share of non-tradables in the Asian CPI basket, authorities’ ability to manage prices, and an anticipated appreciation in Asian currencies support our outlook for a revival in inflation but not an acceleration.
  • With inflation likely to remain below central bank targets in all Asian economies this year, monetary conditions should continue to be accommodative.
  • Risks to our view are to the upside. They stem from several sources, such as upward revisions to our growth outlooks or to forecasts for oil and other commodity prices. The risks from adverse FX movements are also notable for the Asian economies running current account deficits. 

Topics: Economic impact, Inflation, ASEAN, APAC

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