Adverse weather could hit central banks' scope for stimulating emerging markets, economists have warned.
In a report, Hak Bin Chua, economist at Bank of America Merrill Lynch (BoFA), cautioned that Asian central banks faced "risks and uncertainty" from the El Niño phenomenon, with "potential severe weather shocks on growth."
Caused by cyclical warming of the Pacific Ocean, this year's El Niño is the first in five years. Australia's Bureau of Meteorology recently warned that current levels of warmth across the Pacific are higher than normal and reminiscent of 1997's event – the most severe one on record.
Higher temperatures and drought - characteristics of El Niño- are expected to drive up food prices and inflation in countries like India and Indonesia, where the share of food in consumer price inflation is large.
In the three quarters following an El Niño occurrence, inflation tends to spike 1 percent in Indonesia, 0.6 percent in India and 0.5 percent in Thailand, Chua noted.
"That may narrow the room for easing monetary policy and cutting interest rates," he said.