Names will never hurt me –EM monetary credibility remains intact
Emerging market (EM) central banks’ credibility to restrain inflation over the medium-term horizon remains intact despite the tests it’s been subjected to in an age of supply shocks and massive income disappointments – and despite name-calling by some banks’ political masters.
What you will learn:
- We surveyed our economists’ views on 20 EM central banks; these reveal some examples of erosion in independence, accountability and transparency since the era of supply shocks began in 2019. But only in Argentina and Turkey do we see these as attacks of the metaphorical “sticks and stones” variety, which would represent a threat to the bones of price stability.
- In the space of just four years, EM macro volatility has risen from all-time lows to a 25-year high. In the context of an extremely testing macro backdrop, we ask where EM central banks’ credibility lies on the spectrum of robust to ravaged.
- Given the circumstances, it’s remarkable more quarrels haven’t broken out between central banks and their political masters – a sign of the support for low inflation in EMs. Plus, politicians and central bankers know how swift markets would be in punishing undisciplined EM policies.
Friend or foe? Foreign policy takes centre stage
South Africa's preparations for the 15th Brics Summit in August, which the country is hosting, have been overshadowed by the International Criminal Court (ICC) and the warrant of arrest it issued for one of the expected attendees, Russia's President Vladimir Putin, on charges of war crimes. Domestic and foreign critics have accused Pretoria of being much too cosy with Moscow, notwithstanding official assurances that South Africa is neutral in the Russia/Ukraine conflict, and Washington's ambassador to the country caused a diplomatic storm in May when he claimed that South Africa had supplied Russia with weapons. Denials have since given way to a diplomatic charm offensive with South African officials trying to temper the concerns of the country's Western partners, who account for much of its trade, and its Brics partners, who are poised to welcome new members.Find Out More
Will failed mutiny impact Russia’s economic outlook?
Following the failed coup in Russia over the weekend, we will not change our forecasts for GDP nor make significant changes to our commodity price forecasts. However, it highlights the risk of further commodity price shocks in the event of a more prolonged rebellion or destabilisation in Russia.Find Out More
Emerging Markets Monitor: Reassuring signs of slowing inflation
We have raised our aggregate GDP growth forecast for EMs in 2023 by 0.2ppts because most performed better than we had expected in Q1 and have remained resilient in Q2. That said, we have scaled back our expectations for growth in 2024 by 0.1ppt.Find Out More