Daily Management Review

Experts: Major emerging economies keep tightening screws


Central banks in major emerging economies continue to tighten their own policies, fearing not only a temporary rise in inflation but also a shift in inflation expectations away from established benchmarks.

The Institute of International Finance (IIF) in Washington believes that inflation in most developing countries will peak late this year and early next year, helped by lower commodity prices and a resolution of supply problems.

The institute does not expect a renewed rate cut until the second half of 2022. Turkey stands out in the context of rising interest rates against the background of inflationary bursts after the "anti-squeeze" economic stimulus. There, the local central bank has undertaken a stimulative rate reduction against the background of higher inflation and further rate cuts could weaken the lira and increase the pro-inflationary effect.

Another important factor for emerging markets will be the US macrostatistics which will determine whether the Fed will announce in November that it will start tapering its asset-purchase programme. Weak labour market data could be a signal that such a decision will be postponed and vice versa. Statistics on incomes and consumption in August were weaker than expected but ING experts expect an acceleration of these figures. In manufacturing, the ISM leading indicator for business activity accelerated to 61.1 points in September from 59.9 in August.

source: reuters.com