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Policy Rates See Hot August Hikes, whilst China, Turkey & Indonesia On Hold

EMERGING MARKETS
MNI (London)
  • As major central banks hike rates in order to tackle surging inflation, emerging markets have tightened to keep pace and avoid further depreciation against the strong dollar. This month alone, India hiked 50bp to 5.4%, Mexico hiked 75bp to 8.5% and Brazil lifted the Selic rate by 50bps to 13.75%, whilst South Africa hiked 75bp to 5.5% in July.
  • China, Turkey and Indonesia remain of the few EMs not taking part in the current hiking cycle.
  • China held steady at a 3.7% one-year loan prime rate despite global inflationary pressures building due to dampened growth outlooks on the back of strict Covid measures.
  • The Turkish central bank, on the other hand, has held rates at 14.00% since late 2021 despite inflation soaring to 79.6% in July, citing Liralisation goals and price growth due to uncontrollable external influences.
  • Indonesia's 7-day reverse repurchase rate remains at an all-time low of 3.5% as inflation of 4.9% remained in the BOI's target range.
  • The stronger US dollar and higher US rates have weakened incentives for investments in emerging markets, whilst increasing dollar-denominated debt burdens in the unstable global macro environment.


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  • As major central banks hike rates in order to tackle surging inflation, emerging markets have tightened to keep pace and avoid further depreciation against the strong dollar. This month alone, India hiked 50bp to 5.4%, Mexico hiked 75bp to 8.5% and Brazil lifted the Selic rate by 50bps to 13.75%, whilst South Africa hiked 75bp to 5.5% in July.
  • China, Turkey and Indonesia remain of the few EMs not taking part in the current hiking cycle.
  • China held steady at a 3.7% one-year loan prime rate despite global inflationary pressures building due to dampened growth outlooks on the back of strict Covid measures.
  • The Turkish central bank, on the other hand, has held rates at 14.00% since late 2021 despite inflation soaring to 79.6% in July, citing Liralisation goals and price growth due to uncontrollable external influences.
  • Indonesia's 7-day reverse repurchase rate remains at an all-time low of 3.5% as inflation of 4.9% remained in the BOI's target range.
  • The stronger US dollar and higher US rates have weakened incentives for investments in emerging markets, whilst increasing dollar-denominated debt burdens in the unstable global macro environment.