Rising US Interest Rates Won’t Trigger Another Asian Financial Crisis by Hoe Ee Khor and Kimi Xu Jiang

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ASEAN+3 economies are stronger and more resilient today than they were in the late 1990s. Therefore, a tightening of US monetary policy could lead to higher borrowing costs and trigger portfolio outflows similar to the 2013 “crisis crisis,” but a 1997-style financial crisis in Asia is unlikely.

SINGAPORE — Warmongering U.S. Federal Reserve monetary policy reversals have often led to heightened financial and economic stress in emerging economies. In the early 1990s, the Fed rising interest rates preemptively to curb inflation, precipitating the Mexican “tequila” crisis of 1994. In 2013, the Fed signaled its intention to tighten monetary policy, which led to a major selloff in emerging markets known of “conical tantrum.”

Given the region’s history, one would expect policymakers from the ASEAN+3 countries – the ten members of the Association of Southeast Asian Nations, as well as the China (including Hong Kong), Japan and South Korea – are particularly concerned about the Fed’s decision. growing hawkishness. Indeed, the Fed’s recent efforts to rein in persistently high inflation have raised fears of a regional financial crisis, similar to the Asian financial crisis of 1997.

But the Fed’s actions won’t have as much of an impact on the region as they did in the late 1990s. Today, ASEAN+3 economies are stronger and more sustainable, making a 1997-style financial meltdown.

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