EM Special Publication: Asia takes over: A very important change in the EM inflation regime

Research evidence excerpt

EM Special Publication: Asia takes over: A very important change in the EM inflation regime

Deutsche Bank

Research

Europe Emerging Markets Date

17 June 2026

EM Special

Publication

Asia takes over: A very important

change in the EM inflation regime

Oliver Harvey

With energy supply risks seemingly diminishing, a cross check of the effect of the

Macro Strategist

Iran war on inflation in EM is warranted. One of our favourite indicators is simple +44-20-754-51947

inflation momentum: an extrapolation of the last three months' monthly run rate in

year-on-year terms over the next year. The results are striking: as Figure 1 shows,

inflation in CEEMEA has remained very muted. But headline inflation in Latin

America is picking up sharply. Perhaps even more surprising is headline inflation in

Asia, which is accelerating above the level for CEEMEA for the fist time in nearly a

decade and a half and also set to exceed Latin America based on simple

momentum. As Figure 2 shows, the Philippines, Thailand, Vietnam and Korea are

seeing especially sharp momentum. Peru, Chile and Turkey are also accelerating

sharply. Heterogeneity in EM inflation is very clear - Poland, Romania and Israel

have soft momentum.

This theme is less pronounced in core inflation (Figure 3) although it is notable that

Asian inflation is also converging to the rest of EM as well. But clearly the most

important driver is goods rather than services inflation. Six-month annualised PPI

(Figure 4) is showing a substantial pick-up in Asia (indeed, above levels

demonstrated during the twin shocks of the pandemic and Russia/Ukraine war).

The effect is noticeable but less acute in LatAm and CEEMEA. Thailand, Chile,

Malaysia and Korea are seeing the largest upward pressure on PPI.