Starting gun fires for the EM easing cycle

Central bank meetings this month suggest that we’re now on the brink of an EM monetary easing cycle. In China, the Loan Prime Rates were lowered in response to flagging growth. And elsewhere, some central banks whose tightening cycles were particularly aggressive either lowered rates (Hungary) or flagged that rate cuts would come soon (Brazil and Chile). With interest rates in many EMs well above their neutral level, inflation – and core inflation in particular – now showing signs of easing, and growth weakening, we think the rate cutting cycle will broaden out over the course of the next couple of quarters.