MNI BRIEF: Global Rates Divergence To Slow EM Easing- CBRT

Emerging market currencies will come under pressure as a result of slower-than-expected cuts by central banks such as the Federal Reserve, Turkey’s central bank said on Thursday.

Inflation remains above target in many economies, with stickiness in services and geopolitical developments impeding the disinflationary process, CBRT governor Fatih Karahan said in a speech.

The flattening of the market-implied policy rate path was most pronounced for the Fed, he noted, contributing to expectations that advanced economy central banks will ease later and more slowly compared to the previous reporting period.

“This divergence increases global uncertainty and puts pressure on the currencies of emerging economies. Accordingly, we consider that the central banks of emerging economies will be more prudent in cutting interest rates,” Karahan said.

The CBRT will maintain “decisively” its tight monetary policy stance until price stability is achieved, and is prepared to tighten further if necessary, he said.