Interest rate hikes a 'vote of confidence' in Asian growth

SINGAPORE: Recent moves by Asian central banks, including from India, to raise interest rates are a strong vote of confidence that the region will weather risks stemming from the European debt crisis, analysts say.

Since June 24, the central banks of Taiwan, India, Malaysia and South Korea have lifted interest rates by between 12.5 and 25 basis points, citing the need to tame inflation as their economies rebound from the global downturn.

While Asia is not totally immune to the effects of a slowdown in Europe and the United States, the region's dependence on them has been reduced as Asian consumers now play a bigger role in supporting domestic economies, analysts said.

"Concerns over Europe's debt crisis continue to smolder but that hasn't stopped Asia's central banks from pushing ahead with monetary tightening" in the wake of rapid and sustained GDP growth, said Singapore's DBS Bank.



Inflation rates are "nearly back to average in all Asian countries and surely headed higher in months to come," it noted in a market analysis.

DBS said the latest interest rate increases "are a loud vote of confidence from Asia's central banks that (Asia's) growth will continue despite weakness" in Europe, the United States and Japan, the region's top trading partners.