November 17, 2021
Markets

Specter of Stagflation Hangs Over Emerging Markets

Spare a thought for finance ministers and central bankers in the developing world. They probably heaved sighs of relief when the U.S. Federal Reserve decided against raising interest rates at its latest meeting on July 28. Yet they know that the reprieve is only temporary. Even though the delta variant of the COVID-19 virus could slow down the economic recovery, the relevant question is not if the Fed will tighten U.S. monetary policy, but when.

When that happens, it will inevitably add to the current woes of emerging markets, which are already severe and complicated. Over past decades, these countries have been forced to get used to dealing with the spillovers from the advanced economies’ macroeconomic policies. But it is possible that they have never felt as cruelly used by this interdependence as today. While policymakers in advanced economies fret and argue about whether…

Read full article here: foreignpolicy.com