TOKYO: The escalating conflict in the Middle East is reshaping monetary policy worldwide, creating a difficult choice for central banks between supporting growth and containing inflation amid soaring oil prices. Emerging Asian economies face heightened risks: higher fuel costs threaten inflation, while a rush to the US dollar may trigger capital outflows.

The Reserve Bank of India is expected to prioritize growth by maintaining low rates, while Thailand and the Philippines may reverse dovish policies. Manufacturing-heavy economies like South Korea and Japan face rising costs and disrupted trade.

Developed markets also confront challenges. The Federal Reserve, the Bank of Japan, Australia, and New Zealand must balance inflation pressures with slowing growth. Persistent oil hikes above USD 110 a barrel risk stagflation globally.

IMF Managing Director Kristalina Georgieva warned policymakers to ‘think of the unthinkable’ and prepare for prolonged economic shocks.