The Director of the International Monetary Fund (IMF) Asia and Pacific Department warned on Wednesday that the escalation of the Middle East conflict could impact oil prices, affecting many Asian countries.

Additional quotes from the director include:

• “Asian central banks may see scope to loosen monetary policy later this year as inflation moderates.”
• “Average inflation in Asia fell to 2.6% in 2023 from 3.8% in 2022, with particularly swift progress in emerging economies.”
• “Many regional central banks are on course to reach their inflation targets in 2024. Provided policymakers hold steady until inflation is firmly re-anchored, scope for monetary easing may emerge later in the year.”
• “Divergences, with China’s near-zero price growth last year fueling concerns about deflation, and Japan’s inflation will likely remain above the central bank’s 2% target until 2025.”
• “There is a risk that divergent monetary stances in the United States and in Asia would trigger sharp exchange rate movements also this year.”
• “Escalation of Middle East conflict could affect oil prices, impacting many Asian countries.”
• “Had good discussions on exchange rates with Japanese authorities, who were committed to flexible exchange rates which act as a shock absorber.”
• “FX intervention could lower excess volatility and better align exchange rate moves with fundamentals.”

The Japanese Yen edged lower against the USD but remained confined in a familiar range ahead of the Federal Open Market Committee (FOMC) decision.