Core Insights - Asia's resilience to U.S. tariffs may be challenged by a stronger dollar and rising interest rates, which could tighten financial conditions [1][3] - The IMF projects Asia's economy to grow by 4.5% in 2025, slightly down from 4.6% in the previous year, but an increase from earlier estimates due to strong exports [4] Financial Conditions - Continued cuts in U.S. interest rates could lead to a decline in the dollar, allowing Asian central banks to ease monetary policy without fearing capital outflows [2] - Current low interest rates and declining long-term yields have enabled Asian governments and companies to borrow cheaply, helping them cope with the impact of higher U.S. tariffs [2] Risks and Challenges - Rising interest rates, particularly long-term rates, could significantly impact Asia, where debt servicing costs relative to revenue are already high [3] - The IMF warns that risks are tilted to the downside, projecting growth to slow to 4.1% in 2026 [4] Inflation Dynamics - Inflation in Asia has remained modest compared to other regions, attributed to the ability of Asian central banks to anchor inflation expectations and maintain independence from government interference [5] - The importance of central bank independence is emphasized for achieving price stability, while also being accountable to the public [6]