Asia’s Very Complicated Interest-Rate Pause

Interest-rate pauses aren’t exactly in trouble, but things are beginning to look awkward for officials eyeing a decent break. World growth isn’t falling off a cliff and inflation has failed to ease up quite as expected in some big economies. The more fortitude the expansion shows, the greater the risk of a policy mistake. At least in 2022, the direction of policy was abundantly clear.

While the resilience of the US economy may get a lot of attention, the situation in Asia bears close scrutiny. In South Korea, Indonesia and Malaysia, rate hikes have already been suspended. But the cuts in borrowing costs that were considered a natural sequel will take longer to materialize. The almost daily warnings from Federal Reserve policymakers that rates may need to move higher than anticipated aren’t welcome. All central banks assert they move independently from the Fed. In practice, they tend to replicate broad trends in American credit.