Rising inflation has put major DM central banks under pressure and interest rate expectations have risen. But most emerging markets look relatively well placed to weather a period of DM policy tightening. Current account deficits are generally small or in surplus, currencies don’t appear to be in need of large adjustment and many EM central banks have already raised rates a long way. That said, current account risks are growing in some countries (Romania, Chile, Colombia) and Turkey’s large external debts could put the lira quickly back in the firing line.
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