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EM easing cycles not all to do with the Fed

Financial markets have come round rapidly in the last few weeks to our view that EM monetary policy will be loosened further this year. But EM loosening cycles have much more to do with weak domestic growth and low inflation than the prospect of interest rate cuts in the US.
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More from Emerging Markets

Emerging Markets Economics Update

Emerging Markets Capital Flows Monitor

Capital outflows from EMs have eased over the past month, helping to stabilise local asset prices. But we think outflows will pick up again before long. That’s a threat to those EMs whose current account deficits have widened or are widening sharply, including Turkey, Chile and parts of Central Europe. Emerging Europe Drop-In (11th Aug): We’re expecting downturns in Central and Eastern Europe, but how bad could it get? Join this 20-minute briefing on our Q3 Outlook report, including the latest on Turkey, Russia and whether Hungary’s forint has further to fall. Register now.

10 August 2022

Emerging Markets Economics Update

End of the EM tightening cycle creeping closer

While DM central banks are currently raising interest rates in earnest, the past week has brought signs that tightening cycles are now nearing an end in parts of the emerging world. Indeed, with interest rates now well above neutral in much of Emerging Europe and Latin America, policymakers in most countries in these regions will probably ease off the brakes by October. Within Asia, low inflation has allowed policymakers to start tightening later and cycles will end later too, with rates at much lower levels.

8 August 2022

Frontier Markets Monthly Wrap

Five questions and answers on frontier default risks

The spreads of sovereign dollar bonds over US Treasuries are in distressed territory in almost a third of EMs covered in the JP Morgan EMBI Index, with the majority of those being frontier markets. In this note, we answer five key questions on default risks in frontier markets. EM Drop-In (4th August, 10:00 ET/15:00 BST): Join our monthly online session on the big issues in emerging markets. In this 20-minute briefing, the team will be answering your questions about debt risks amid global tightening, the latest on the inflation outlook and much more. Register now. ​

3 August 2022

More from Capital Economics Economist

European Economics Focus

Cyprus to outperform euro-zone, but risks remain

Cyprus has now recovered from the economic crisis of 2012-13, which was caused primarily by its oversized banking sector. While a number of risks remain, notably the high level of non-performing loans, we expect the economy to continue expanding more rapidly than the euro-zone as a whole for the next few years, and the public debt ratio to fall steadily.

20 June 2019

Emerging Europe Data Response

Russia Activity Data (May)

May’s activity data suggest that, following extremely weak GDP growth in Q1, Russia’s economy has failed to gather much momentum in Q2.

20 June 2019

Emerging Asia Economics Update

Interest rates in Taiwan to be left on hold

Taiwan’s central bank (CBC) left interest rates unchanged today at 1.375%, and is likely to be in little rush to cut interest rates despite the poor outlook for growth. We expect interest rates to be left on hold until at least the end of this year.

20 June 2019
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