Fabiana Negrin-Ochoa

For Asia, the war has definitely an outsized impact in terms of inflationary risk because it's a region that relies so heavily on energy imports, many from the Middle East, of course.

Even though that's driven up a lot of expectations that central banks will start tightening policy and there'll be like a hawkish shift.

It's not that clear cut because the fact that the inflationary shock is supply driven means that central banks don't really have the right toolkit with which to address those problems.

And central bankers in the region are also cognizant that they don't want to raise rates too quickly and then stifle the fledgling economic recoveries that we've seen through the last year, even though there was all this tariffs.

turmoil.

But definitely, I mean, it's really important for the central banks to send that signaling that they are ready to act if certain indicators show that things have gone out of control.

If core inflation, the measure that strips out all these volatile items, if that hits certain pain thresholds, then central banks will come in, even though it's a supply-driven shock, because their job is also to anchor people's expectations of inflation.

So that's where you're seeing a lot of this sort of preemptive

messaging now the rbi went to great lengths to point out that they're actually in a really good position relative to past crises but they still listed very clearly all the channels through which the war will impact them even if a truce is reached and there is a lasting resolution so in his speech the rbi governor specifically mentioned that

The supply shock can turn into a demand shock very quickly if the supply chains aren't smoothed out and the flows of commodities don't resume as normal.

Because then you're going to have really high input costs for companies and that affects every single industry pretty much.