Bank of America economists reported that Asian central banks’ counterparts have “no rush” to follow the U.S. central banking despite its sharp turn toward hawkishness.

The economists said that there are little to no concerns about falling behind the curve and most EM Asia’s monetary authorities will continue to move at their current pace, paying more attention to recovery of domestic demand.

The volatility in global markets has been caused by investors shifting their positions to prepare for rate hikes this year from the Federal Reserve. This scenario can cause capital flight and has historically hurt Asia’s emerging countries. It drives U.S. Treasury yields up, which could lead to a higher dollar.

However, Bank of America economists stated that there were three main reasons emerging Asian central banks could “cool down their feet longer”.

1. Consumer inflation moderate: “Annual CPI is expected to remain broadly in accord with policy targets. This warrants regional central bank to adjust monetary strategies at their own pace in our view.”
2. Weak domestic demand growth. “Our forecasts indicate that the average EM Asia GDP will grow by a little less than the pre-COVID trend in 2020-22. The US and EM ex Asia, however, did much better at closing the output gap.
3. Foreign exchange reserves and current account balance shielding pressure from capital outflow: “FX reserves continued to grow in EM Asia despite the sharp capital outflow in 2020 … EM Asia has a current surplus, even though it is a net importer of commodities.

We believe that EM Asian central bank, with the exception of the [People’s Bank of China]”They said that they will slowly tighten the monetary policy but in their own time, rather than marching with the Fed.”

China’s economy was among the first to recover from the pandemic’s initial year of infected. However, the withdrawal of stimuli and tightening of policy has led to an a. sharp slowdown in domestic demand.

In a note, Tan Boon Heng, Mizuho economist, stated that recent monetary policy announcements “revealed much patience” from the central banks in Thailand, Malaysia and Indonesia.

Bank Negara Malaysia (Bank of Thailand), Bank Indonesia and Bank Thailand have maintained key interest rates at the same level. Tan explained that this was due in part to “lack of, and delayed growth recovery” in those three countries.

Tan stated that Bangko Sentral ng Pilipinas (the Philippines’ central bank) is likely to complete the “unanimous policy hold” during its meeting this week. This stands “in sharp contrast” with peers. South KoreaAnd SingaporeHe said that central banks tightened their monetary policies to fight inflation.