INSUBCONTINENT EXCLUSIVE:
LONDON: There are signs that the tightening cycle among emerging market central banks could be coming to an end and may be about to reverse
as the dollar rally and rise in global borrowing costs has run out of steam.
Net interest rate hikes across a group of 37 developing
economies showed just one raise in January, compared with a peak of nine hikes in November.
Interest rate rises by major emerging market
central banks have outstripped or matched cuts for nine straight months — the longest such run since the summer of 2011 — as
policymakers battled the fallout from a strong dollar, rising inflation and softer currencies.
Below is a list of emerging market economies
that have recently raised interest rates.
Chile- Chilean central bank policymakers decided unanimously to raise the benchmark interest to
3 amid a gradual rise in inflation and a strengthening economy.
Mexico- The Bank of Mexico hiked its benchmark interest rate by 25 basis
20, warning of uncertainty caused in part by the new leftist government’s economic policies as well as the risk of higher
inflation.
Thailand- Thailand’s policymakers raised the key rate by 25 basis points to 1.75 per cent on Dec
19, its first tightening since 2011, while also lowering the forecasts for economic growth and exports.
Russia- Russia’s central bank
hiked its main interest rate by 25 basis points to 7.75 per cent on Dec
14 to keep a lid on rising inflation and offset pressure on an already weak rouble.
Pakistan- Pakistan’s central bank raised key interest
rates to 10 per cent on Nov
30 and sharply cut growth forecasts, warning of headwinds from rising inflation and high current account and fiscal deficits
The bank has hiked rates by more than 4 per centage points since January 2018.
South Korea- The central bank raised its policy interest rate
30 for the first time in a year in a widely expected move aimed mainly at containing a boom in parts of the country’s property
market.
Israel- In a surprise move, the Bank of Israel increased short-term interest rates for the first time in more than seven years on
26, and indicated that its monetary tightening path will be slow and steady.
South Africa- The South African Reserve Bank hiked its
benchmark lending rate for the first time in nearly three years on Nov
22, saying the risk of higher inflation in the longer-term remained elevated and that it could not risk waiting until later to take
action.
Indonesia- The central bank surprised markets on Nov
15 by hiking its interest rate for the sixth time this year, stepping up its battle to defend the beleaguered rupiah currency as
policymakers struggle to reduce imports and lower a yawning current account deficit.
The Philippines- The central bank raised its benchmark
interest rates for the fifth straight time on Nov
15, in a bid to tackle high inflation and bring it back to within its target range next year.
Sri Lanka- Policy makers unexpectedly hiked
the key policy rates on Nov
14, a move aimed at defending a faltering rupee currency as foreign capital outflows pick up amid an escalating political crisis.
Czech
Republic- The Czech National Bank delivered its fourth straight rate hike on Nov
1 to keep ahead of inflation pressures stemming from the European Union’s tight labor market, and it signaled more tightening next
year.
Dollar PegsAfter the US Federal Reserve’s Dec
19 decision to raise its target range for the federal funds interest rate by a quarter of a per centage point, the following countries also
hiked their rates by 25 bps because their currencies are pegged to the US dollar:
Hong Kong raised the base rate charged through its
overnight discount window by 25 basis points to 2.75 per cent on Dec
19.
Saudi Arabia raised its reverse repo rate to 2.50 per cent on Dec 19.
Bahrain said it raised its one-week deposit facility to 2.75 per
cent from 2.50 per cent on Dec
19.
United Arab Emirates raised the interest rates on certificates of deposit in line with the increase in US dollar rates on Dec
