Thursday, February 20, 2014

Emerging economies at risk of rising inflation

Fed has increased the pace of its QE tapering, structural reforms are not likely until after elections; and incumbent governments have been similarly wary of the growth-depressing effects of tightening fiscal, monetary, and credit policies.

Indeed, the failure of many emerging-market governments to tighten macroeconomic policy sufficiently has led to another round of currency depreciation, which risks feeding into higher inflation and jeopardizing these countries ability to finance twin fiscal and external deficits. Chinese growth is unlikely to accelerate and lift commodity prices;