How to Ride Out a Brush With Market Panic

At the peak of the 2008 global financial crisis, Tim Geithner, then president of the Federal Reserve Bank of New York had advice for a prominent Wall Street chief executive: Before you speak in public, banish the fear from your voice. If central bankers in Asia are to prevent market somersaults this week from morphing into more serious problems, they should keep this in mind.

Underplaying the importance of the gyrations — should they continue — risks appearing to investors like nobody is in charge. Too dramatic a response, and it might spur more anxiety. Policymakers should also keep some measures in reserve. The bulk of what they’ve had to say in Asia has been declarative. That’s a good start. The Middle Eastconflagration has thrown up big challenges. But there are important issues that haven’t gone away.

From troublesome inflation in Australia tosagging currenciesin South Korea and Indonesia, a regionalstock rout—and dimming prospects for interest rate cuts by the Federal Reserve — there’s much to deal with.

Reserve Bank of Australia Governor Michele Bullock was among the first to make extensive remarks. Bullock acknowledged the need for flexibility during conflict — and that it’s impossible to predict the economic outcomes so soon. What is known,she emphasized at abusiness summit in Sydney on Tuesday as financial markets were still digesting the implications of strikes on Iran by Israel and the US,is that price gains are too rapid.

“I would discourage people from thinking that we necessarily only need to move” gradually on interest rates, Bullock said.The RBA’s target for inflation is between 2-3% — a closely watched gauge was 3.4% in January.

Bullock’s concerns might seem pedestrian to her counterpart at the Bank of Korea, Rhee Chang Yong. That country’s stock market suffered itsbiggest one-day fall on Wednesday and its currency, the won, weakened beyond 1,500 per dollar, the first such dip since 2009. Clearly some response was warranted. Rhee delayed a tripto Bangkok.Officials said they were closely monitoring the situation, noting it was driven by factors beyond Korea’s borders. They wereprepared to respond to prevent sentiment becoming too one-sided —a correct response.

Context is also important. Korean officials have been facing challenges for a while. An asset bubble has been on the BOK’s mind for at least a year and Rhee has frettedabout foreign exchange for months. In recent months, authorities rolled out measures to buttress the won, one of Asia’s worst performers in 2025. This will be an ongoing task, regardless of the war’s duration.

The Indonesian central bank has been intervening consistently for the past year to stem the rupiah’s slide. India has also been a frequent presence, ensuring the rupee’s retreatto record lows doesn’t degenerate into a collapse. Both were buyers on Wednesday.

Even for the Fed, the Middle East complicates fraught debates. Kevin Warsh, the next Fed chair, needs the Federal Open Market Committee to deliver the rate cuts President Donald Trump demands.Members of the panel, however, have already expressed reservations about additional reductions. A prolonged surge in oil prices is likely to fuel inflation, which is already hovering slightly above the Fed’s 2% target. An early present to Trump looks less likely the longer the conflict drags on.

The defining drama is still on the widening military theatre and there’s a lot of effort devoted to gaming out its long-term impact on the price of energy. Central bankers have witnessed far more testing times for their economies and financial systems: The subprime collapse and the early period of the Covid-19 pandemic. In Asia, a generation of policymakers have memories of the late 1990s implosion . That’s made them particularly sensitive to sudden swings in capital flows. What has transpired this week doesn’t have that vibe to it.

Alan Greenspan was determined to project calm on Black Monday in 1987, when American stocks suffered a mighty hammering. The former Fed boss opted to fly to Dallas to attend abanking conference the next day. Greenspan was, however, persuaded by the White House to return to Washington. Before he left the hotel, hesigned off on a statement that was as succinct as it was brief. The Fed was ready to serve as a source of liquidity to support the system. The then-Chair came to consider it a masterly concise message, according to Sebastian Mallaby’sbook The Man Who Knew: The Life and Times of Alan Greenspan.

From Seoul to Sydney, take it from the maestro, as Greenspan came to known.You don’t want to be too calm, but steadfastness and brevity can count for a lot.