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Asian central banks to be more dovish than expected in 2015: Credit Suisse

Monday, February 2, 2015 - 11:23
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Asian central banks will be more dovish than expected in 2015, and stronger disinflation is still to come, said a Credit Suisse report released on Monday.

ASIAN central banks will be more dovish than expected in 2015, and stronger disinflation is still to come, said a Credit Suisse report released on Monday.

In addition to lower oil prices adding to pre-existing disinflation in many economies, the European Central Bank's (ECB) quantitative easing "should help reduce risk of material capital outflows in the near term, providing a window for rate cuts in Asia", said Credit Suisse research analyst Santitarn Sathirathai.

On the fiscal policy front, however, Credit Suisse sees budget deficits narrowing across Asia - except for Singapore and Taiwan - with some governments (including those of India, Indonesia, and Thailand) using the fall in oil prices as an opportunity to strengthen their fiscal positions.

Together, a more dovish monetary policy and hawkish fiscal stance will mean sluggish growth in Asia in H1 2015, followed by a stronger recovery in H2.

"The key reason is that growth benefits from lower oil price and interest rates may take time to come through while headwinds from tighter fiscal stance and moderating global production momentum will likely cap growth in the near term," said Mr Sathirathai.

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