Hearing there from Garfield about the fact that look we really are expecting to see this big hike coming through from the Fed
but what happens after that. Did they then start to pay the expectations perhaps slower hikes or do we still continue to see
this aggressive path. So the market is expecting the Fed to move 75 basis points this week but the focus really is shifting from
clients from the markets to what happens thereafter. If we look at markets now they're actually looking at the Fed to reach peak
rates in early Q1 next year. And for the Fed to start cutting rates thereafter two to three cuts are already priced for 2023.
So the Fed here now is tightening to try and rein in inflationary pressures but they're really very much tightening
into fears of a global recession. And markets are thinking they'll have to pivot quickly. Are those fears warranted or do
you think we could even be in the midst of all the start of a recession now. So we're going to get us second quarter GDP
numbers later this week which could technically meet the definition of a recession already. Now our base view is that the
US enters a full run full blown recession next year. But absolutely it could come earlier than that. In Europe as well we
could be in a recession by the end of the year. So our models are putting the likelihood of a global recession pretty high
right now. And what could that mean Mollica for four Asian central banks or
are they just gonna have to catch up with what the Fed even the ECB is going to be doing with supersized jumbo rate hikes.
I think it does put Asian central banks in a bit of a tight spot for two main reasons. One Asian central banks haven't lifted a
great deal yet on average. And Asian Central Bank in this cycle has raised rates by about 60 basis points. That compares to 120
in the developed world around 350 in Eastern Europe and about 600 in Latin America. And there is a narrowing window now for
Asian central banks to catch up and to currency pressures in Asia might make it difficult for central banks to ease back with
the Fed. So while the market's pricing Fed cuts next year it's not pricing the same for Asia.
Tell us about the urgency to hike metric that you guys have developed. What is it telling you now. Why. Why do it. And what
were we seeing actually the most I guess stress and urgency for people to actually hit the banks here to actually hike.
So we've developed a popular urgency to tighten metric for different Asian central banks. Looking at the four main pillars
of policy rising price pressures domestic activity currency weakness and global growth. And we've come up with a way of
gauging how sensitive different countries are to these four metrics. What we found is you can kind of split Asia into three
main groups. So countries where their urgency to tighten is quite high. Like Korea Philippines Singapore. The good news is
these central banks have front loaded a lot of tightening so they could be in a position to take their foot off the pedal.
The second group is countries like Thailand where there's rising urgency but they haven't done a lot yet. They might need to
tighten quickly. And the last group is countries like China India Indonesia where that pressure is low and they might stay
more dovish. You mentioned Asian currencies there and a lot of this is being reflected by pay dollar. You think Asian
currencies have weakened enough. So Asian currencies have certainly weakened a lot on a lot of our valuation metrics.
They're trading at the cheapest levels in recent history. We also believe that Asian currencies have priced in a good amount
of slowdown. If you look at Asian currency performance it tends to lead exports growth and it's already pricing in exports
declining to the levels we saw in 2015 and 2019 slowdowns. So on those metrics Asian currencies have weakened a lot but there is
also a safe haven bid for the dollar and that tends to rise and recession times and that could hold Asian currencies back.
I was in the year of the results from this metric. Why is India low urgency Mark. Obviously we've seen war. The currency is at
record lows. Commodity prices of course we've sort of faded a little bit of that rally but certainly we're still elevator
above 100 bucks for oil right now. Why do they. Are they not in the rush to hike.
That was certainly one of the most surprising results from that study for us that India didn't strike as having as high urgency
as other countries. And we are starting to hear slightly more dovish rhetoric as well. I think there's a couple of reasons.
One. When we look at the distance of inflation versus their target band Indian inflation at 7 is not that much above the 6 a
ceiling that RBI has in place in other central banks like Thailand. That gap is a lot wider. The domestic recovery is also
not showing very hot signs yet in India. And from a currency pressure perspective RBI has a lot of reserves that they can
also use to defend the rupee and may not need to resort to monetary policy in the same way. We know a lot of the recovery
is being driven by tourism. We've been looking at surging hotel rents here in Singapore. Thailand looking quite good on that
front too. But the other big Kate part is these rising price pressures and food inflation. How much of that is a concern. So
when we when we look at Thailand and specifically looking at the currency it's a it's a it's a currency that ideally given how
much it's weakened. Could start to strengthen back tourism we expect to come in and a million tourists per month for the rest
of the year. That could bring about 2 billion to 3 billion dollars extra inflows into Thailand which could be quite
constructive for the currency. But ultimately I think the Bank of Thailand does need to start to raise rates. Inflation is
close to 8 percent. Policy rates in Thailand are still half a percent. They need to start to close that gap. And then I think
the currency could respond.