BUTC – Weekly Bottom Line

HIGHLIGHTS OF THE WEEK

• Capital outflows out of emerging markets, and BIITS in particular, intensified this week, leading the central banks of India, Turkey, and South Africa to raise their policy interest rates.

• Turbulence among EMs did not undermine the Fed’s resolve to reduce asset purchases, with the FOMC trimming the pace of bond buying by $10bn to $65bn per month, without even a passing reference in the statement to the current volatility.
• As such, it would appear that the FOMC believes that the current bout of volatility is transitory and is unlikely to materially impact the global outlook. Moreover, the cut in bond buying is a vote of confidence in the strength of U.S. recovery, which should prop up global growth (and EM exports) this year.
• This belief was underscored by the advance estimate of fourth quarter GDP, which grew by a healthy 3.2% on consumer and export strength.

Chuhao(Joe) Zhou
Source: Bloomberg, TD Economics

Editor: Chuhao(Joe) Zhou
Email: wowbu@bu.edu

This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

5 × 2 =

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>