“Markets should not be surprised by our actions if the economy evolves in line with expectations.”The remarks come as investors bet against emerging markets amid concerns about Fed policy. A fifth of emerging markets and middle-income countries have debt levels above 70 percent of GDP, with Brazil at 84 percent and India at 70.2 percent, according to the IMF Capital flows into emerging markets are very much a function of investors’ risk appetite, Chile’s central bank chief Mario Marcel said at the Zurich conference. Central bank Governor Murat Cetinkaya has already tightened monetary policy with a 75-basis-point rate hike this year.Russia’s central bank is no longer signaling it will lower interest rates further. Indonesia has heavily intervened by selling down record foreign reserves holdings to support the rupiah and has warned interest rates may need to go higher. “The only one that has historically worked is an interest rate increase, and later a fiscal adjustment.”

Source: Economic Times May 08, 2018 13:49 UTC