Federal Reserve Chair Yellen remains confident the economy will strengthen and rates are likely to go up this year. REUTERS/Carlos Barria
Your feedback is important to us!
We invite all our readers to share with us their views and comments about this article.
Disclaimer: Comments submitted by third parties on this site are the sole responsibility of the individual(s) whose content is submitted. The Daily Star accepts no responsibility for the content of comment(s), including, without limitation, any error, omission or inaccuracy therein. Please note that your email address will NOT appear on the site.
Alert: If you are facing problems with posting comments, please note that you must verify your email with Disqus prior to posting a comment. follow this link to make sure your account meets the requirements. (http://bit.ly/vDisqus)
Just like footballers before the World Cup final, central bankers in emerging markets are readying themselves for the biggest test of their careers: the first rate increase in nearly a decade by the US Federal Reserve.However, Janet Yellen, Fed chairwoman, remains confident the economy will strengthen and rates are likely to go up this year.When the Fed eventually moves, economists believe a rate rise is bound to provoke large capital outflows away from Latin America and Asia. Pressure to raise rates will vary from country to country and will depend on whether the Fed moves in a moderate, clearly signaled manner or more suddenly and surprisingly.These include the accumulation of large foreign exchange reserves, as well as macroprudential tools such as regulating banks' foreign currency dealings which some economists believe also act as de facto capital controls.Central banks stand ready to deploy them, as some of them did at the height of the global financial crisis.However, were the Fed to surprise with a big or sudden movement, economists believe the cost-benefit analysis could change.
FOLLOW THIS ARTICLE