APAC | Weak growth limits inflation worries in the region

Inflation has been elevated in many Asian economies for several months now. Indeed, the Bank of Korea and the Monetary Authority of Singapore have deemed the problem big enough to begin policy normalisation.

What you will learn from this report:

• However, we remain of the view that inflation is not as big a worry for Asia Pacific (APAC) as a whole, as in the US and many other major economies.
• Supply shortages and rising commodity prices are behind the boost in inflation. In most APAC economies, cyclical drivers are less evident, with weak growth prospects slowing the passthrough from input to output prices.
• We expect inflation to peak in Q4 2021, but stay above 3% for most of 2022. The slow downtrend is largely due to lingering supply-side disruptions and shouldn’t trigger widespread and aggressive rate hikes next year.