How will EM central banks respond to the currency sell-off?

The recent bout of EM currency weakness may prompt (further) FX intervention, particularly in Asia, to stem currency volatility. Turkey’s central bank is likely to hike rates at its meeting next week and a hike is also now on the table at the Bank Indonesia meeting. The good news is that, among the major EMs, currency vulnerabilities are generally low – we don’t expect major adjustments. Even so, if exchange rates remain under pressure, monetary easing cycles are likely to be slower than we are currently forecasting.