Emerging markets face risk of policy error amid conflicting priorities

Emerging-market central banks face a Catch-22 where plunging economic growth means they can’t keep monetary conditions tight, but elevated inflation doesn’t allow them to halt rate hikes either.
Photo: Gregers Tycho
Photo: Gregers Tycho
By Maciej Onoszko and Srinivasan Sivabalan, Bloomberg

Countries from Poland to Colombia, India to South Korea, are walking the tightrope trying to figure out the exact level of borrowing costs that won’t cripple their economies but will keep a lid on consumer prices. The answer isn’t clear or easy. As long as the Federal Reserve keeps raising rates and China is hobbled by Covid, policymakers in poorer nations remain at the mercy of factors beyond their control.

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