Is it that the advanced economy's central bankers are deliberately sending contrarian signals in a subtle tactic with the following objectives:
(a) keep emerging markets in an unstable equilibrium from a competitor point of view; (a hit and run technique to weaken the potential opponent)
(b) have the hot money flows back to home turf so as to keep wealth values on the move up in home countries;
(c) a modern day drain of wealth theory where foreign investors sell in hordes at market peaks and exit for home in anticipation of such rate hikes;
(d) avoid an excessive rise of home currency...
The views expressed here arewithout any risk or responsibility.
(a) keep emerging markets in an unstable equilibrium from a competitor point of view; (a hit and run technique to weaken the potential opponent)
(b) have the hot money flows back to home turf so as to keep wealth values on the move up in home countries;
(c) a modern day drain of wealth theory where foreign investors sell in hordes at market peaks and exit for home in anticipation of such rate hikes;
(d) avoid an excessive rise of home currency...
At Brighton, Kristin Forbes. of the Bank of England said
quite a few things that seemed to suggest that she may join in for an interest rate hike:
- the widespread pessimism (in the global markets) is overstated.'
- China is responsible for over one-third of global GDP growth since 2011, and is still expected to drive about 35% of global growth this year. India is on track as per IMF.
- Ukraine, Russia, Brazil, Belarus, and Ecuador are the only emerging markets that are in recession (defined as two quarters of negative quarterly GDP growth).
- Emerging economies will continue to face challenges related to its debt overhang, financial system, and demographics...
- .. much of the current gloomy discussion appears to be overblown.
Source Bank of England
At Amherst- Janet Yellen
"The labor market has achieved considerable progress
over the past several years. Even so, further improvement in labor market
conditions would be welcome because we are probably not yet all the way back to
full employment. Although the unemployment rate may now be close to its
longer-run normal level--which most FOMC participants now estimate is around
4.9 percent--this traditional metric of resource utilization almost certainly
understates the actual amount of slack that currently exists: ..."
"judgments imply that the real interest rate consistent
with achieving and then maintaining full employment in the medium run should
rise gradually over time. This expectation, coupled with inherent lags in the
response of real activity and inflation to changes in monetary policy, are the
key reasons that most of my colleagues and I anticipate that it will likely be
appropriate to raise the target range for the federal funds rate sometime later
this year "
Source FRB
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