EM financial markets have been hit this month by the rise in US Treasury yields, which has re-ignited some concerns about a re-run of the Taper Tantrum. So far, capital outflows from EMs have been relatively small. And financial conditions across the emerging world remain loose – they haven’t tightened by nearly the same extent as they did in 2013. While some EM central banks are shifting into tightening mode, only in Turkey does this really reflect the recent market moves. Elsewhere – notably Brazil and Russia – the prospect of interest rate hikes has much more to do with domestic inflation concerns. Most EM central banks are likely to maintain very loose monetary conditions for some time yet.
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