Tags: World Bank Economists | Fed | Rate Hike | Emerging Markets

World Bank Economists Warn Fed Hikes May Be Bumpy for Emerging Markets

World Bank Economists Warn Fed Hikes May Be Bumpy for Emerging Markets
(Dollar Photo Club)

Tuesday, 15 September 2015 09:50 AM EDT

A rise in market expectations for U.S. interest rates as the Federal Reserve starts to normalize policy could cut capital inflows to emerging markets by as much as 45 percent, World Bank economists said in a paper published on Tuesday.

The Fed has left the door open to a modest rate rise on Thursday, although economists and investors are divided over whether policymakers will act now or later in the year.

The World Bank paper said although most expected a smooth tightening cycle from the Fed, there was a risk of a substantial hit to capital flows if investors started to expect more aggressive hikes and drove up long-term bond yields.

A 1 percentage point rise in U.S., euro area, U.K. and Japanese yields could cut capital inflows to emerging and frontier economies by 45 percent within a year, representing up to 2.2 percentage points of their combined economic output.

"Emerging and frontier market economies may hope for the best during the upcoming tightening cycle, but given the substantial risks involved, they would do well to buckle their seatbelts in case the ride gets bumpy," said Carlos Arteta, one of the paper's authors.


© 2024 Thomson/Reuters. All rights reserved.


Markets
A rise in market expectations for U.S. interest rates as the Federal Reserve starts to normalize policy could cut capital inflows to emerging markets by as much as 45 percent, World Bank economists said in a paper published on Tuesday.
World Bank Economists, Fed, Rate Hike, Emerging Markets
193
2015-50-15
Tuesday, 15 September 2015 09:50 AM
Newsmax Media, Inc.

Sign up for Newsmax’s Daily Newsletter

Receive breaking news and original analysis - sent right to your inbox.

(Optional for Local News)
Privacy: We never share your email address.
Join the Newsmax Community
Read and Post Comments
Please review Community Guidelines before posting a comment.
 
Get Newsmax Text Alerts
TOP

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved
NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved