Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

PK Basu has 34 years experience covering Asia's economies and markets (equities, fixed income and currencies), including 20 years covering the global economy. He was Chief Economist (SE Asia & India) at Credit Suisse First Boston for 5 years, and Chief Asia (x-Jpn) Economist at Daiwa Securities for a similar period. Among other roles, he was global head of research at Maybank Kim Eng, Malaysia equity research head and chief ASEAN economist at Macquarie, Chief Economist at ICICI Securities, ASEAN economist at UBS and the first chief economist at Khazanah Nasional (where he was co-head of research, and led all agri-business initiatives). PK Basu started his career in the Asia Service of WEFA (Wharton Econometrics) in Philadelphia in 1990, rising to be Director of their Asia Service in June 1994. 
PK's book, "Asia Reborn: A continent rises from the ravages of Colonialism and War to a New Dynamism" won the Tata Literature First Book Award (non-fiction) for 2018. It is the first single chronicle of the modern economic and political history of the whole of Asia (from Iraq and Turkey to Korea and Japan, and everything in between), told from an Asian perspective.

Chief Economist & Political Strategist

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CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Cross Asset Strategy

Last week's official abandonment by the Fed of a rigid inflation target was preceded by a surprisingly large US$450 billion reduction in the monetary base between May and July 2020. This demonstrates a degree of tactical flexibility in monetary management that is a medium-term positive for markets, although adding a degree of uncertainty to the evolution of the yield curve.  
Last week, the FOMC adopted an altered framework for monetary policy -- effectively abandoning the rigid 2% inflation target that has been the basis for central bank policy over the past quarter-century. Instead, the Fed's target will henceforth be "2% average inflation" over time (providing leeway for inflation to stay above 2% to offset long periods that it is below 2%). This has correctly been interpreted as allowing the economy to be "hotter for longer" before the policy-rate rises, solidifying a policy that was becoming increasingly clear in recent FOMC policy statements. 
Given its apparent determination to aggressively boost liquidity amid the wide output gap that has opened up because of Covid, the Fed has surprisingly shrunk its monetary base by nearly US$450 billion between May and July 2020--and M2 (broad money supply) also shrank MoM in July 2020. Perhaps the FOMC has quietly adopted an M2-growth target of 20-24% YoY as a sort of ceiling (although unannounced) in an implicit nod to the Quantity Theory of Money: excessively rapid increases in money supply (in the absence of declining velocity) are likely to cause inflation, especially when real GDP is stagnant or declining.  
The yield curve duly flattened in June-July, while the monetary base and M2 were being reined in, but has resumed steepening after last week's statement (at the annual Jackson Hole meetings) about the Fed's longer-term approach to monetary policy. The Fed's demonstrated tactical flexibility suggests that it is "managing" the yield curve actively -- not allowing it to steepen too rapidly, but to gradually lift it along with inflation expectations. Such tactical flexibility is a medium-term positive for markets (especially when inflation begins to rise durably in 2021), although it makes the evolution of the yield curve unpredictable. The Fed's flexible approach to implementing monetary policy reduces the likelihood of a policy error in 2021.

Last week's official abandonment by the Fed of a rigid inflation target was preceded by a surprisingly large US$450 billion reduction in the monetary base between May and July 2020. This demonstrates a degree of tactical flexibility in monetary management that is a medium-term positive for markets, although adding a degree of uncertainty to the evolution of the yield curve.  
Last week, the FOMC adopted an altered framework for monetary policy -- effectively abandoning the rigid 2% inflation target that has been the basis for central bank policy over the past quarter-century. Instead, the Fed's target will henceforth be "2% average inflation" over time (providing leeway for inflation to stay above 2% to offset long periods that it is below 2%). This has correctly been interpreted as allowing the economy to be "hotter for longer" before the policy-rate rises, solidifying a policy that was becoming increasingly clear in recent FOMC policy statements. 
Given its apparent determination to aggressively boost liquidity amid the wide output gap that has opened up because of Covid, the Fed has surprisingly shrunk its monetary base by nearly US$450 billion between May and July 2020--and M2 (broad money supply) also shrank MoM in July 2020. Perhaps the FOMC has quietly adopted an M2-growth target of 20-24% YoY as a sort of ceiling (although unannounced) in an implicit nod to the Quantity Theory of Money: excessively rapid increases in money supply (in the absence of declining velocity) are likely to cause inflation, especially when real GDP is stagnant or declining.  
The yield curve duly flattened in June-July, while the monetary base and M2 were being reined in, but has resumed steepening after last week's statement (at the annual Jackson Hole meetings) about the Fed's longer-term approach to monetary policy. The Fed's demonstrated tactical flexibility suggests that it is "managing" the yield curve actively -- not allowing it to steepen too rapidly, but to gradually lift it along with inflation expectations. Such tactical flexibility is a medium-term positive for markets (especially when inflation begins to rise durably in 2021), although it makes the evolution of the yield curve unpredictable. The Fed's flexible approach to implementing monetary policy reduces the likelihood of a policy error in 2021.  

iShares 20+ Year Treasury Bond ETF (TLT US)

Fed Pragmatism: Abandoning Inflation Targets but Actually Shrinking Base Money