Economics
Fed Hike Will Intensify Market Risks for Asian Central Banks
- Negative real policy rates in Asia are spurring fund outflows
- Southeast Asia has the slimmest of buffers to rising US rates
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The expected 75-basis-points interest rate increase from the Federal Reserve this week will heap pressure on its Asian counterparts to speed up monetary tightening -- or risk further fund outflows and weaker currencies.
An analysis of policy rates in Asia Pacific versus their five-year averages shows a high degree of vulnerability across the region, as does an examination of interest rates adjusted for inflation, and yield spreads versus US Treasuries.