Asia's once fast-growing economies are struggling with weak domestic demand that is keeping a lid on inflation in contrast to some developed markets, heightening the chance many central banks will forgo interest rate hikes this year.
For investors and policymakers in Asian emerging markets, high and sometimes destabilising inflation has always gone hand in hand with strong growth underpinning their development.
That has changed markedly, as slow vaccinations and a new wave of coronavirus infections delay economic recoveries in countries like Thailand, Indonesia, the Philippines and India.
While some Asian nations have seen inflation perk up, reflating growth remains a higher priority for them even as rising inflation draws increasing attention in western nations like the United States, Britain and Canada.
To be sure, higher commodity prices are affecting Asia, as with the rest of the world, by raising the cost of raw materials. South Korea is also preparing for rate hikes as soon as this year as its economy and the housing market run hot.
But soft demand will keep inflation distant from red zones and take immediate pressure off most Asian central banks to respond with tighter monetary policy, analysts say.
"Resurgence in infections is forcing some Asian nations to reimpose curbs on activity that are weighing on inflation, a trend that will continue for some time," said Makoto Saito, an economist at Japan's NLI Research Institute.
"Given weak domestic demand, many Asian economies won't see inflation accelerate sustainably. That means their central banks likely won't hike interest rates until next year," he said.
Thailand's central bank maintained record low interest rates this month and projected headline inflation of just 1.2% this year, as the tourism-dependent country struggles with a third wave of coronavirus infections.
Headline inflation in the Philippines hit 4.5% in May from a year earlier, though its central bank kept record low rates this month and projected inflation to return to within its 2%-4% target band by the second half of the year.
Indonesia's annual inflation accelerated to 1.68% in May from 1.42% in April to mark its highest level since December, but remained below the central bank's 2%-4% target range.
Even in India, where retail inflation spiked to 6.3% in May, the central bank is unlikely to react with tighter policy to cushion the blow to growth from a deadly second wave of the pandemic, sources have told Reuters.
Asia's situation contrasts with emerging markets in other regions such as Latin America, where inflation and capital flight risks have triggered rate hikes or talk of tightening.
While a US tightening remains a risk for Asia central banks, the lessons of the region's financial crisis in 1998 and the 2013 "taper tantrum" have made them more resilient to the risk of a huge capital outflow triggered by the Fed.
"Asia's foreign exchange reserves, outside of China, have hit another record high so there's definitely a lot more of a buffer that Asian central banks have to manage volatility," said Khoon Goh, head of Asia research at ANZ Bank in Singapore.
Soft domestic demand shrank imports even as exports to other parts of the world rose, narrowing current account deficits and making countries like Indonesia less vulnerable to the risk of a capital flight, analysts say.
While the pandemic's scars may begin to heal next year, prospects of benign inflation may mean Fed policy is likely to have a bigger impact on Asian monetary policy than inflation.
The real test for Asian central banks could come next year, when the Fed may deliver clearer signals on rate hike prospects and put more upward pressure on the region's bond yields.
"If you have rising bond yields in the US, you could actually see rising bond yields in Asia coming back quite strongly, so we are not disconnected in that aspect," said DBS investment strategist Joanne Goh.
HSBC said it was staying away from the long end of the yield curve for high-yielding Asian economies, as their central banks could be in a tight spot once the Fed actually raises rates.
"I do think it will become much more uncomfortable, maybe not this year but into next year especially when you see the whites in the eyes of actual tapering," said Andre de Silva, head of global emerging-markets rates research at HSBC.