The Failed EM "Turn" and What it Means for DM
One of the things that has been very noteworthy this hiking cycle is to the extent that EM (emerging markets) central banks have been a leading indicator for DM (developed markets) central banks. For over a year now, most EM central banks across the world have been engaged in aggressive tightening cycles. What is noteworthy about this is that it happened before the Federal Reserve pivoted in Q3 of last year to a more hawkish stance. In previous cycles, especially in the 2010s decade, EM central banking was reactionary to DM policy cycles. When the Fed was dovish, it was an outlet for EM policy makers to ease, and when the Fed was hawkish, EM was often times forced to raise rates irregardless of domestic economic conditions.
This time has been different