Kinh tế

How do emerging markets react when the Fed raises interest rates?

Previously, every time the Fed interest rate hike, emerging economies in Asia all face challenges because rising interest rates in the US push up the dollar exchange rate and US Treasury bond yields, leading to the flight of hot capital flows from the region. Against such a backdrop, central banks in Asia are under pressure to raise interest rates to prevent capital flight.

But Bank of America experts say that there are three reasons why central banks in emerging economies are not racing to raise interest rates with the Fed, at least in the early stages of the tightening cycle:

First, inflation in emerging Asian economies is still low. The consumer price index (CPI) has not been so hot that it will allow Asian central banks to gradually adapt policies.

Second, growth in emerging Asian economies is weakening. Therefore, the economic recovery goal is still number 1 for these countries.

And third, continued growth of foreign exchange reserves and current account surpluses could protect emerging Asian economies from divestment pressure.

The central banks of Thailand, Malaysia, the Philippines and Indonesia are all keeping interest rates steady, and experts say that is because the economic recovery momentum is still weak in these countries. However, there are also a number of other central banks in Asia such as South Korea and Singapore that have had to raise interest rates to combat inflation. Or just a few hours before the results of the Fed meeting, India’s central bank RBI also suddenly raised interest rates, with an increase that is said to be quite strong, 0.4%. It has been almost 4 years since this bank has made a move to raise interest rates.

Brazil’s central bank is also mulling a rate hike to 12.75% a year.

All of these rate hikes point to one big cause: Inflation. The economies of the past several months have been facing soaring commodity prices. Raising interest rates is used as a measure to cool down when the inflation index becomes too high.

* Invite readers to watch programs broadcast by Vietnam Television on TV Online and VTVGo!

You are reading the article How do emerging markets react when the Fed raises interest rates?
at Blogtuan.info – Source: vtv.vn – Read the original article here

Back to top button