Monetary stances in emerging East Asia remain largely accommodative.1 While the improving economic performance and rising inflation in advanced economies has led to adjustments in their monetary policies, most central banks in emerging East Asia maintained accommodative monetary policies, even as some regional markets, such as the Republic of Korea and Singapore, tightened their monetary stances due to inflationary pressure.

Ample liquidity supported regional financial conditions during the review period from 30 November 2021 to 9 March 2022, with some weakening signs related to the United States (US) Federal Reserve’s tapering and its signaling of monetary tightening, and the Russian Federation’s (Russia) invasion of Ukraine. Between 30 November 2021 and 9 March 2022, bond yields in emerging East Asia rose on inflationary pressure and spillovers from higher bond yields in major advanced markets. The majority of regional currencies depreciated against the US dollar, with most currencies posting relatively small exchange rate movements. Net portfolio inflows were recorded in the region, while equity markets continued to gain, particularly the markets of Association of Southeast Asian Nations (ASEAN) members on improved economic performance in the fourth quarter (Q4) of 2021. At the same time, risk premiums edged up due to increased risk aversion generated by subdued investment sentiment over the Federal Reserve’s expected tightening and the Russian invasion of Ukraine.