Daijiworld Media Network - New Delhi

New Delhi, Jul 5: Declining global crude oil prices are providing the Reserve Bank of India (RBI) and several other Asian central banks with greater flexibility to support economic growth, as easing energy costs help moderate inflation and strengthen external balances, according to Standard Chartered's Weekly Market View report.

The report said falling oil prices are offering significant disinflationary relief across much of Asia, reducing pressure on policymakers to maintain high interest rates. However, it noted that the extent of the benefit will differ among countries depending on their dependence on imported energy and the nature of domestic inflation.

Standard Chartered pointed out that most Asian economies are net importers of crude oil, making them direct beneficiaries of lower global energy prices. Cheaper crude helps reduce imported inflation, improves current account balances and strengthens the broader macroeconomic outlook.

For major oil-importing economies such as India, Thailand and the Philippines, the report said lower energy costs provide central banks with additional room to prioritise economic growth while keeping inflation under control.

Despite the favourable outlook, the bank said monetary policy is unlikely to follow a common path across the region.

According to the report, countries such as South Korea and Singapore continue to experience demand-driven inflation, partly fuelled by heavy investment in artificial intelligence (AI) infrastructure. As a result, their central banks may need to keep interest rates elevated for a longer period, unlike countries such as India, where there is greater scope for policy easing.

The report also highlighted that lower oil prices are expected to benefit regional financial markets by supporting risk assets and local-currency bonds, as softer inflation expectations typically improve investor sentiment.

However, Standard Chartered cautioned that adverse weather conditions could pose a significant risk to this positive outlook.

The bank estimates a 63 per cent probability of a Super El Niño developing during the fourth quarter of 2026. Such an event could disrupt agricultural output through extreme heat and prolonged drought while simultaneously increasing electricity demand for cooling, leading to higher energy prices and renewed inflationary pressures across Asia.

According to the report, future movements in crude oil prices and evolving weather conditions will remain critical factors influencing the monetary policy decisions of the RBI and other central banks in the region over the coming months.