The escalating crisis in the Middle East has significantly changed the outlook for global central banks, posing a difficult trade-off between underpinning growth and countering inflation. For emerging Asian central banks such as Thailand and the Philippines, cutting interest rates could be a risky investment due to the added price pressure from higher fuel costs and potential capital outflows from worsening terms of trade with the U.S. The dilemma is particularly acute for manufacturing-heavy economies like South Korea and Japan dependent on global trade, stable markets, and cheap raw material costs. The Bank of Japan has less room now to deal with price pressures due to inflation exceeding its 2% target for nearly four years.