Global central banks have split interest rates last year to save the market, and now may be forced to enter a new era of interest rate hikes due to rising Inflation! What is more worrying is that the emerging markets in the past year a lot of debt to fight the Epidemic, once the era of interest rate hikes re-emerged, the fear of the emerging economies are still in a difficult recovery or heavy debt burden on a hundred pounds, triggering a new round of crisis fuse and the United States bailout related.
Emerging market central banks may become the pioneer of interest rate hikes, Brazil this Thursday may raise interest rates by 0.5%; followed by the central bank of Turkey may raise interest rates by 1%, the bank has long begun to raise interest rates to support the currency lira and curb inflation; this Friday, the Russian central bank to discuss interest rates, there is a chance to imply that the upcoming tightening of monetary policy.
Next, the central banks of Nigeria and Argentina may raise interest rates in the second quarter at the earliest; market indicators show that India, South Korea, Malaysia and Thailand are rising chances of interest rate hikes. More attention is the “grand finale” protagonist, the survey showed that three-quarters of the surveyed economists expect that the U.S. Federal Reserve will raise interest rates in 2023, a total of about 0.5%!
Goldman Sachs pointed out that, taking into account the rise in global interest rates and core inflation next year is likely to firm up, the Time to normalize monetary policy of most central banks, from the original forecast of the end of 2022 or 2023, ahead of schedule to 2022.
Global central bank monetary policy may accelerate the reversal, mainly because the United States to push fiscal stimulus measures, so that the global economic outlook is more optimistic, commodity price inflation is heating up, global debt interest rates are also pushed up, but also led to capital outflows from emerging markets, so that emerging currencies under pressure. World Bank chief economist Reinhardt said that Food prices and rising inflation brought different impacts on countries, highlighting the uneven global economy, the highest risk countries including Turkey and Nigeria, so the future may see emerging markets to take a series of interest rate hikes to fight currency depreciation and suppress inflation.
However, emerging market debt is surging in the midst of the epidemic and the onset of an interest rate hike cycle will pose a default problem. Last year, the global government, corporate and household debt increased by $ 24 trillion to fight the epidemic, so that emerging market debt outstanding as a percentage of total gross domestic product (GDP) ratio rose to 250%, the largest increase in debt is China, Turkey, South Korea and the United Arab Emirates. Moreover, emerging market debt may continue to increase, including the OECD (OECD) and the International Monetary Fund (IMF) have warned governments around the world, can not be too early to withdraw stimulus measures.
Not only that, emerging markets in general to take forward the slower pace of vaccination, making the outlook more difficult to predict. According to Citi estimates, emerging economies may have to the end of the third quarter of this year to the first half of next year sometime, in order to achieve mass immunization, in contrast, developed economies are expected to reach before the end of the year.
Although some emerging countries may be more resistant to the impact of rising interest rates than the 2013 “tapering panic”, because in emerging Asia, the central bank last year, foreign reserves rose by $468 billion, the most in eight years, to provide a risk buffer, but Capital Economics emerging markets economist Jackson pointed out that Some economies that rely heavily on the issuance of foreign currency bonds, such as Turkey, Kenya and Tunisia will face the greatest risk; at the same time, the local currency bond yields climbing, the biggest impact on Latin American economies.
Nomura warned that despite U.S. Treasury Secretary Yellen called for “big action” to save the market, but if emerging economies follow the U.S. to launch more fiscal stimulus measures, will be a dangerous strategy, because the net interest burden of emerging market governments than developed countries more than twice as high. The bank continued to point out that South Africa, Egypt, Pakistan and India’s net interest payments as a percentage of the economy, in 2011 to 2020 has increased sharply.
Some central bank interest rate forecast this week]
Brazil’s central bank: expected to raise interest rates by 0.5% to 2.5%
Turkey: expected to raise interest rates by 1% to 18
Federal Reserve: economists are expected to raise interest rates in 2023, but will not be presented in the authorities’ interest rate forecasts
Bank of England: expected to maintain the currency policy unchanged
Bank of Japan: expected to maintain the currency policy unchanged, will announce a policy review
Russia’s central bank: or hinted at the imminent tightening of monetary