Everyone watches statements emanating out of the US Federal Reserve like a hawk. Jerome Powell, the chairman of the top central bank, said that the time was ripe for the US to make policy adjustments. That means America will move towards reducing interest rates hiked rapidly soon after the COVID-19 pandemic. It will be a gradual process to ensure that the US economy continues to grow without fears of any inflationary pressures.
The interest rate policy action directly affects foreign flows into emerging markets. As the US reduces borrowing rates, money flows from assets denominated in the US dollar to emerging markets.
With a strong hint about rate cuts, money would start moving swiftly. That causes asset prices across non-US markets to rise. Investors flock to lowvalue equity, commodity or property markets.
This story is from the August 26, 2024 edition of The Morning Standard.
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This story is from the August 26, 2024 edition of The Morning Standard.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
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