No more Monetary Easing for Southeast Asia?

This was observed in SGD last Friday when Monetary Authority of Singapore choose not to weaken SGD for fear of uncontrolled inflation. Now it appears Singapore is not alone in facing looming inflation fears.

Central banks in Southeast Asia may be forced to abandon this year’s monetary easing and raise interest rates before their north Asian peers in 2013, as rising inflation risks overshadow the current economic gloom.

Thailand, Malaysia, the Philippines and Indonesia will probably raise rates next year, HSBC Holdings Plc, UBS AG, and Australia & New Zealand Banking Group Ltd. predict, even as interest-rate swaps show investors expect little or no tightening. The banks expect China to refrain from changing its monetary policy stance and India to cut borrowing costs.

“In Southeast Asia, local demand is still humming,” said Frederic Neumann, co-head of Asian economic research at HSBC in Hong Kong. “The region is gliding through the global export downturn on the back of rising credit growth, buoyant consumer spending, and generous fiscal support. Before long, however, price pressures, already bubbling away beneath the surface, will erupt again.”

The region’s prospects stand out in contrast to the challenges threatening the economies of China and Japan, with government spending and younger populations supporting domestic demand and luring investment even as global expansion weakens. While Thailand’s unexpected rate cut this week underscores the immediate risks to growth, Singapore’s central bank this month refrained from policy easing as elevated inflation trumped worries about a shrinking economy.

The Indonesian rupiah, Thai baht, Philippine peso and Malaysian ringgit are forecast to rise the most after India’s rupee by the end of 2013, according to Bloomberg surveys.

Via – Bloomberg

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