Be careful what you wish for: Why a Fed cut makes life easier and harder for Asian central banks

FOR much of this year, many emerging Asian economies have found themselves forced to hold an unwelcome course on interest-rate policy that has become more outdated by the day.

The reason is simple. The US Federal Reserve began its post-Covid tightening cycle back in March 2022, gradually increasing the top end of its Fed funds target rate range from a pandemic-era 0.25 per cent to 5.5 per cent, where it has sat since the middle of 2023. Because of that, Asia’s central banks have been caught in a double bind.

On the one hand, their own inflationary pressures have eased significantly, in many cases faster than those in the US. These days, they are worrying more about stifling growth by keeping rates too high for too long.