Asia Economics Comment:The big monetary policy divergence

Take a step back. The world is heading in different directions. Ever so slowly,admittedly, but steadily and perceptibly. Central banks in developed economies areleaning towards tightening. In emerging Asia, by contrast, the bias remains foreasing. True, China doesn’t quite fit the broad pattern: regulatory tightening hassqueezed rates higher of late. Still, it remains to be seen how long that will last:with growth bound to decelerate again, and inflation still nailed to the floor, thereare limits to the PBoC’s ability to press the brakes. For now, all appears sweet andperfectly priced. And, fortunately for Asia, developed markets may struggle for awhile to hit the fast lane, keeping market rates low, and possibly lower than policymakers would like. Look further ahead, however, and the big monetary policydivergence will build up tensions