Most EM central banks in easing mode

Despite the focus in advanced economies on the timing of monetary policy tightening, the majority of EMs remain in easing mode. More EM central banks cut their policy interest rates than raised them for the fourth consecutive month in July. The bulk of easing continues to be concentrated in Latin America – central banks in Brazil, Colombia and Peru have all cut rates over the past couple of months. This reflects the unwinding of previous inflation shocks caused by sharp currency falls. But central banks in India, South Africa and Indonesia have also eased monetary policy over the past few weeks and the trend towards rate cuts is likely to spread to other EMs in the coming months. Policymakers in Russia paused their easing cycle in July, but we expect them to resume cutting interest rates soon. Even in Turkey and Egypt, where central banks had until recently been tightening policy, falling inflation looks set to bring easing on to the agenda before year-end.