With Quantitative Easing on Horizon, Emerging Economies Must Respond
Policymakers in developing countries are facing tough decisions with the tapering of quantitative easing expected to come in the near future, the Financial Times reports.
Analysts and economists alike widely expect the U.S. Federal Reserve to announce a $10 billion reduction in quantitative easing after its September 17-18 meeting. This reduction, a so-called “tapering” in the amount of quantitative easing, is forecast to occur even in the absence of strong economic indicators from the U.S. economy.
Given that Ben Bernanke’s stint at the head of the Fed is drawing to a close, it would make much more sense for the announcement to come sooner rather than at the Fed’s October meeting, where there is no follow-up press conference, or at the Fed’s December meeting, which is during the height of the holiday shopping season.
As news of possible tapering was released several months ago, emerging economies have been hit fairly hard. When quantitative easing was in place, investors could grab cheap dollars and invest in markets such as Brazil, Indonesia, and India.