Free Trial

Tightening Trends Reflect Larger Inflation Problem In OECD Than Asia

GLOBAL

MNI (Australia) - OECD countries inflation problem is significantly worse than that for non-Japan Asia, even if China is excluded. This is reflected in the monetary response we have seen in the two regions. The Bank of Korea, one of the more active Asian central banks, has hiked 275bp cumulatively this cycle compared with 425bp for the Fed.

  • Inflation had not yet peaked in the advanced nation bloc in October with headline inflation of 10.7% y/y and core of 7.7%. Data from the US and euro area for November suggest that October may have been the high.
  • Covid restrictions have been holding down activity and thus inflation in China. But the non-Japan Asia ex China aggregate was 5.4% in November down from a peak of 6.4% in September. Underlying inflation was stable at 4.1%, well below the OECD average. While headline inflation is exceeding many central banks’ targets, a lot of policy tightening in Asia has been to stabilise currencies, as the USD soared in response to aggressive Fed rate hikes.
  • Advanced nations have experienced higher inflation than Asia due to their very tight labour markets, higher European energy prices, larger impact from food prices, greater pass through of costs and more Covid-related fiscal stimulus. Many Asian countries also have fuel price subsidies.
OECD vs non-Japan Asia CPI y/y%

Source: MNI - Market News/Refinitiv/IMF

OECD vs non-Japan Asia underlying CPI y/y%

Source: MNI - Market News/Refinitiv/IMF

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.