With inflation rearing up everywhere, money markets see hikes as a certainty
Turkey's central bank in Ankara, Turkey. Picture: REUTERS/UMIT BEKTAS
As policy tightening expectations rise for the US, Britain and other advanced nations, money markets are wagering emerging markets will have to ramp up the hiking pace. The country’s poorest households also face affordability challenges thanks to rising local food prices. The latest household affordability index, compiled by civil society initiative the Pietermaritzburg Economic Justice and Dignity Group , showed that the average household food basket for low-income households from regions around SA, surged an annual 10.2% in October.
Possibly money markets are being too exuberant. Barclays head of economics research, Christian Keller, expects emerging as well as developed market central banks to deliver fewer interest rate hikes than priced, but he warned nonetheless that “when your inflation expectations start to deteriorate, that is when you need to act as a central bank”.
“Hiking early not only helped with the inflation side of things, but also helps prevent a 2013-taper tantrum style scenario, and certain central banks have got on top of this and seen their currency do OK,” said Robert Ojeda-Sierra at Fitch Ratings.
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