IMF Sees Room For Rate Cuts In Asia, Urges Clarity In China’s Property Fixes

The International Monetary Fund on Wednesday, has said that as inflation moderates, the Asian central banks may see room to ease monetary policy.

The IMF also urged China to provide a clear indication of how it intends to resolve its property-related issues.

The director of the IMF’s Asia and Pacific Department, Krishna Srinivasan said “Average inflation in Asia fell to 2.6% in 2023 from 3.8% in 2022, with particularly swift progress in emerging economies.

“With inflationary pressures “receding rapidly,” prospects for a soft landing are improving in Asia.

“Many regional central banks are on course to reach their inflation targets in 2024. Provided policymakers hold steady until inflation is firmly re-anchored, scope for monetary easing may emerge later in the year”

Srinivasan did, however, issue a warning about national disparity, pointing out that while Japan’s inflation is expected to stay over the central bank’s 2% objective until 2025, China’s nearly negative price growth last year “fuelled concerns about deflation.

“Relatively benign inflation meant Asian central banks raised interest rates less than their counterparts in other regions, putting downward pressures on some Asian currencies in the fall of 2023, he said.

“These pressures have abated for now, as the (U.S.) Federal Reserve has signalled interest rate cuts going forward. However, there is a risk that divergent monetary stances in the United States and in Asia would trigger sharp exchange rate movements also this year,” he said.

Chioma Kalu

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