Emerging markets have entered first big rate-rise cycle since 2011: FT
Arirang News
2018-09-06
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Emerging economies such as Turkey, Argentina and Ukraine have entered the first so-called "big rate rise cycle" for the first time since 2011.
Analysts are already expressing concerns about the domino effect of such developments.
Our Han Soo-ah reports.
Central banks in emerging markets have reportedly entered an austerity cycle for the first time since 2011... when the global economy was still recovering from the financial crisis.
The Financial Times reported Tuesday, citing research by Capital Economics,... that the number of central banks in emerging economies that have raised interest rates this year... is higher than at any point in seven years.
Rates are rising in developed countries like the U.S. because of the economic boom in their economies... but tightening in emerging markets... is a defence mechanism against the depreciation of their currencies.
After the Argentine peso fell, Buenos Aires raised its policy rate by a staggering 60-percent.
Turkey also raised its key rate this year by 10-percentage points to 17-point-seven-five-percent to try and stop the depreciation of the lira.
It's a similar story in Ukraine, India, Indonesia, the Philippines and the Czech Republic.
"Emerging economies are under pressure with the U.S. Federal Reserve saying it plans to raise its key interest rate up to two more times this year. Also, the appreciation of the U.S. dollar is prompting capital flight from emerging markets to the U.S."
Contagion risks from Argentina and Turkey are growing for other emerging markets and economies with weak fundamentals such as those with current-account deficits and high inflation rates. Some say it resembles the domino effect seen in the late 1990s when Asian economies were hit with a major financial crisis.
"Growing household debt and slowing growth are the main reasons why the Bank of Korea can not confidently raise its key interest rate this year... despite risks of capital flight."
The BOK in August kept its benchmark rate at one-point-five percent for the ninth consecutive month,... pointing to economic uncertainties, including July's employment figures and low business sentiment.
A rate increase by the BOK could also further burden households repaying debts... currently estimated at around one-point-four-trillion dollars,... which would put a strain on consumption when their disposable income declines.
Han Soo-Ah, Arirang News.
Analysts are already expressing concerns about the domino effect of such developments.
Our Han Soo-ah reports.
Central banks in emerging markets have reportedly entered an austerity cycle for the first time since 2011... when the global economy was still recovering from the financial crisis.
The Financial Times reported Tuesday, citing research by Capital Economics,... that the number of central banks in emerging economies that have raised interest rates this year... is higher than at any point in seven years.
Rates are rising in developed countries like the U.S. because of the economic boom in their economies... but tightening in emerging markets... is a defence mechanism against the depreciation of their currencies.
After the Argentine peso fell, Buenos Aires raised its policy rate by a staggering 60-percent.
Turkey also raised its key rate this year by 10-percentage points to 17-point-seven-five-percent to try and stop the depreciation of the lira.
It's a similar story in Ukraine, India, Indonesia, the Philippines and the Czech Republic.
"Emerging economies are under pressure with the U.S. Federal Reserve saying it plans to raise its key interest rate up to two more times this year. Also, the appreciation of the U.S. dollar is prompting capital flight from emerging markets to the U.S."
Contagion risks from Argentina and Turkey are growing for other emerging markets and economies with weak fundamentals such as those with current-account deficits and high inflation rates. Some say it resembles the domino effect seen in the late 1990s when Asian economies were hit with a major financial crisis.
"Growing household debt and slowing growth are the main reasons why the Bank of Korea can not confidently raise its key interest rate this year... despite risks of capital flight."
The BOK in August kept its benchmark rate at one-point-five percent for the ninth consecutive month,... pointing to economic uncertainties, including July's employment figures and low business sentiment.
A rate increase by the BOK could also further burden households repaying debts... currently estimated at around one-point-four-trillion dollars,... which would put a strain on consumption when their disposable income declines.
Han Soo-Ah, Arirang News.
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