SCARCELY is one Federal Reserve meeting over before the doves and hawks start circling again. The hawks, who hope for a rate increase, had some unlikely companions in their flock in the run-up to the September meeting: central bankers from India, Indonesia, Mexico and Peru. These emerging-market policymakers have said that since everyone is expecting a hike by the end of this year, it would be better to get it over and done with sooner (October) rather than later (December).
That is surprising, given warnings by international development heads, such as Kaushik Basu of the World Bank, that a rate hike would be tough for emerging economies. Portfolio investors have already sold $40 billion worth of emerging-market assets in the third quarter of 2015, according to a report released on September 29 by the Institute of International Finance, making this the worst quarter for emerging markets since the last quarter of 2008. The IMF reported this week that corporate debt in emerging markets quadrupled from 2004 to 2014, and a growing portion of this debt is traded in bond markets. Indonesia, Mexico, and Peru are all in the top eight emerging markets most vulnerable to dearer imports, a...Continue reading
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