EM Bankers a Step Ahead

It was a busy week for central bank policy makers in Emerging Markets, however the direction of policy varied. On the hawkish side, Russian and Mexican central bankers continued to raise rates, as inflation in both remained on an upward trend. Russia is notable in that the central bank continues to move aggressively to keep real rates positive, even with a material economic slowdown expected in 2022 and the threat of significant sanctions if the Ukraine crisis takes a turn towards violence. To his credit, Putin has allowed an independent central bank to steer monetary policy. On the more dovish side are India and Thailand. Both central banks decided to remain on hold. For Thailand, economic growth last year was one of the weakest in EM at only 1%, so growth rather than inflation is the main concern, for now. The RBI in India is concerned about sustaining growth, and a more expansionary budget with higher borrowing needs may have stayed their hand. Indonesia was able to keep rates on hold as inflation, though rising, is relatively subdued at just over 2%, and real rates remain positive, keeping the currency well-anchored. Emerging market central bankers continue to be a step ahead.