Easy monetary policy supportive of economic growth across the Asia-Pacific region would follow the US Federal Reserve's cut in interest rates by an aggressive 50 basis points (bps), according to the top economist of the Manila-based Asian Development Bank (ADB).

"I think it's good for the region because with the US lowering rates more aggressively, then it gives central banks here more space to also ease on monetary policy and support investment," ADB chief economist Albert Park told Manila Bulletin on the sidelines of the state think tank Philippine Institute for Development Studies' (PIDS) 10th Annual Public Policy Conference on Thursday, Sept. 19.

"It gives them more flexibility, so it's good," Park replied when asked if central banks in the region should follow suit. "I think a lot of central banks were kind of waiting; they didn't want to be ahead of the Fed."

In the Philippines, the Bangko Sentral ng Pilipinas (BSP) went ahead of the US Fed and cut the key policy rate by 25 bps to 6.25 percent last month, plus hinted to further slash interest rates amid tempered inflation expectations.

Moving forward, monetary easing by the Fed and central banks in Asia-Pacific would have a "positive” impact on overall economic prospects here, Park said.

In light of the US Fed's easing, Park disclosed that the ADB's economists are now making some final changes to their growth outlook for the region, ahead of the lender's release of its Asian Development Outlook (ADO) report update on Sept. 25.

Last April, the ADB's ADO projected average gross domestic product (GDP) growth of 4.9 percent for developing economies in the Asia-Pacific region this year and a six-percent expansion for the Philippines.

But Park cautioned that if the Fed's action pointed to a slower US economy, spillover effects could also reach Asia-Pacific.

"The main concern is, I think the reason the US stock market was hesitant after that [rate cut], maybe they're concerned that the Fed has some concerns that the US economy is slowing down. If that's the case, then obviously, that's not good for the region that the US is slowing down," Park said.

In a Sept. 19 report, the Washington-based Institute of International Finance (IIF) forecasted a total of 100-bp US Fed cuts this year, "a bit less aggressive than what markets are pricing right now."

"Federal Reserve rate cuts are poised to have a substantial impact on the global economy, particularly in emerging markets, which are highly sensitive to changes in US monetary policy," the IIF said.

"As the Fed begins a series of rate cuts, the resulting lower US interest rates could lead to a weaker dollar... A softer dollar eases the burden of servicing [dollar-denominated] debts, reducing outflows of foreign currency reserves and lowering the risk of a balance of payments crisis. Additionally, a weaker dollar makes exports from these countries more competitive on the global stage, potentially boosting trade balances and overall economic growth," the IIF noted.

"Beyond the direct effects on debt and trade, Fed rate cuts typically encourage global investors to seek higher returns in emerging markets. Lower interest rates in the United States reduce the yield differential between US assets and those in emerging markets, making investments in these regions more attractive. This renewed capital inflow can lead to currency appreciation in emerging markets, reduce borrowing costs, and support local equity and bond markets," the IIF added.

Among emerging Asian economies, the IIF said India, Indonesia, and Vietnam stand to "benefit significantly from increased foreign investment, allowing their central banks more flexibility to cut domestic interest rates without the fear of capital flight or sharp currency depreciation."

The think tank Oxford Economics, on the other hand, believes that the US Fed's big rate cut will unlikely be copied by monetary authorities elsewhere, especially in developed economies.

"We think it may give policymakers in emerging markets more scope to loosen, but we are skeptical that the Fed's decision will prompt more aggressive rate cuts by central banks in other major economies," Oxford Economics director of global macro research Ben May said in a Sept. 19 report.