Inflation easing across Asia, paving way for rate cuts

Trade-reliant economies get fillip amid uncertain outlook due to risk of US tariffs

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SYDNEY - Inflation is easing across Asia as lower food and fuel prices and stronger local currencies against the US dollar push down costs.

That is giving the region's central bank chiefs scope to support their trade-reliant economies as the risk of US tariffs and related uncertainty weigh on the outlook.

Consumer price indexes have moderated across most of the economies in the region that have already reported data for May.

In April, regional consumer prices on a simple average basis excluding Japan slowed to about 1.5 per cent, the lowest level since the first quarter of 2021, according to economists at Nomura Holdings.

Overnight indexed swaps have priced in more dovish bets for the Reserve Bank of Australia and less hawkish moves from the Bank of Japan over the past month.

Money market pricing also implies more dovish outlooks over the three-month horizon for South Korea, India and Malaysia.

Central banks have already begun taking action.

The Reserve Bank of India last week cut interest rates by a bigger than expected 50 basis points, while Australia's central bank adopted a surprisingly dovish stance after delivering a quarter percentage point cut.

In both cases, officials pointed to demand concerns and the potential impact of US tariffs.