Lower crude oil prices give RBI more room to support growth: Standard Chartered

Falling global crude oil prices are easing inflationary pressures across Asia, giving the RBI and other central banks greater flexibility to support economic growth. However, Standard Chartered warns that a possible Super El Nino could reverse these gains by pushing energy prices higher

New Delhi: Falling global crude oil prices are giving the Reserve Bank of India (RBI) and several other Asian central banks greater flexibility to focus on supporting economic growth, as lower energy costs ease inflationary pressures and improve external balances, according to Standard Chartered’s Weekly Market View report.

The bank said the decline in oil prices is providing “disinflationary relief” across much of Asia, reducing the urgency for policymakers to keep interest rates elevated.

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However, it added that the benefits are likely to vary across economies depending on their reliance on energy imports and the underlying drivers of inflation.

According to the report, most Asian economies are net importers of energy, making them direct beneficiaries of lower crude prices.

Cheaper oil reduces imported inflation, eases pressure on current account balances, and improves the overall macroeconomic outlook. For major energy-importing countries such as India, Thailand and the Philippines, this creates additional space for central banks to prioritise economic growth over inflation control.

Despite the broader positive outlook, Standard Chartered said monetary policy across Asia is unlikely to move in a uniform direction.

It noted that countries such as South Korea and Singapore continue to face demand-driven inflation linked to strong investment in artificial intelligence (AI) infrastructure. As a result, their central banks may need to keep interest rates higher for longer, even as economies like India gain greater room for policy easing.

The report also said that lower energy prices are supportive of regional financial markets, particularly risk assets and local-currency bonds, as declining inflation expectations improve investor sentiment.

At the same time, Standard Chartered warned that weather-related risks could threaten this favourable outlook. The bank estimates a 63 per cent probability of a “Super El Nino” developing in the fourth quarter of 2026. Such a weather event could disrupt agricultural production through extreme heat and drought while also increasing electricity demand for cooling, potentially driving energy prices higher and reigniting inflationary pressures across the region.

According to the report, the evolving trajectory of oil prices and weather conditions will remain key factors shaping the policy decisions of Asian central banks in the months ahead.