Following a temporary reversal in Q3, EM inflation has started to fall again in the last few months. While this is set to continue, we think it marks the start of a second phase in the EM disinflation process – one that will be characterised by a much more gradual grind down than seen in the first half of the year. This will leave inflation above target in many EMs for some time. As a result, while the EM easing cycle looks set to broaden out, policy interest rates will remain above neutral throughout 2024 in several places.
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