Tighten or ease? 2015 predictions for Asia central banks

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The coming year is shaping up to be a challenging one for Asian central bankers, confronted with a balancing act of supporting economic growth whilst guarding against potential volatility arising from the normalization of U.S. interest rates.

But there is one source of respite as policymakers tread this delicate course: receding inflationary pressures.

"The benign inflation outlook is helpful as it gives Asian policy makers breathing room at a time when global outlook remains multidirectional, with the U.S. economy showing strength while EU and China look to be losing momentum," said Taimur Baig, chief economist, Asia at Deutsche Bank.

With the exception of India and Indonesia, the bank sees no more than 4 percent inflation anywhere in Asia next year thanks to a favorable food and fuel price dynamic.

Some will cut…

There are rate cuts in store for China, India, and South Korea in 2015, the bank predicts.

The People's Bank of China (PBoC) and the Reserve Bank of India (RBI) are forecast to cut rates by 50 basis points and Bank of Korea by 25 basis points over the course of the year.

Read MoreChina's key inflation gauge remains at 5-year low

The PBOC has resisted calls for broad-based monetary easing this year, resorting to targeted reserve requirement ratio (RRR) cuts for banks which actively engaged in lending to the agricultural sector and SME customers.

Beijing, time to unleash aggressive easing: Pro
Beijing, time to unleash aggressive easing: Pro   

The RBI, meanwhile, has left its benchmark repo rate unchanged since January, when the central bank increased borrowing costs by a quarter percent point to 8 percent. Rapidly cooling inflation in India, however, has led to growing calls for the central bank to lower rates in recent months.

The Bank of Korea has already cut interest rates twice this year, in August and October, in moves widely seen as giving in to pressure from the government to boost its growth policies.

…Others will hike

However, not all economies in Asia are facing a disinflationary environment.

As such, Indonesia, the Philippines and Malaysia may face tighter monetary conditions next year, according to the bank.

Read MoreIndonesia's fuel hike may put kibosh on 'fragile' tag

Both Bank Indonesia and Bank Negara Malaysia are poised to raise rates by 25 basis points and Bangko Sentral ng Pilipinas is expected to hike rates by 50 basis points.

"The call for rate hikes in these countries is driven by local factors," Baig said.

In Indonesia, inflation could jump toward the end of this year as the new government under President Joko Widodo implements a new fuel price policy to reduce subsidies. In a move to anchor inflation expectations after the government this weekraised fuel prices more than 30 percent, the country's central bank hiked its benchmark rate by 25 basis points to 7.75 percent on Tuesday.

Read MoreBank Indonesia hikes rates after fuel hike

Inflation in Malaysia will likely quicken as the government moves further to reduce its subsidy bill and broaden the tax base. Next April, the government will introduce a 6 percent goods and services tax.

Meantime, several years of rapid growth in the Philippines has resulted in a pickup in demand-driven inflation that needs to be contained, Baig said.