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Central banks shifting into easing mode

EM growth will be weaker than most expect over the coming quarters. And with inflation falling back at the same time, the nascent EM monetary easing cycle will broaden out. Strong wage pressures in Latin America and Emerging Europe will limit how far inflation falls and how far central banks there can cut interest rates. Inflation and rates are likely to be a lot lower across much of Asia. EM external and financial vulnerabilities are generally smaller than they were a few months ago, but we remain concerned about a handful of countries including Colombia, Turkey and some Frontier Markets.

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