It’s all very well removing the punchbowl from your own party. But what about when the rich family next door have been supplying liquor to the neighbourhood’s teenagers for the best part of a decade and eventually decide to stop?
The Federal Reserve’s meeting next week, at which it may raise interest rates after leaving them on hold for nearly seven years, has naturally raised concern among emerging markets. Before this year’s falls in commodity prices and currencies, the two defining episodes in EM assets since the global financial crisis have been the taper tantrums of mid-2013 and early 2014 at the very prospect of the Fed removing monetary stimulus.
This week the World Bank’s chief economist, Kaushik Basu, weighed in on the subject, saying that a premature Fed rate rise could wreak havoc across emerging markets, leading to further destabilising capital outflows. It may seem unusual, then, that several EM policymakers themselves seem quite relaxed at the prospect. At the corroboree of monetary policy experts at the Fed’s annual conference in Jackson Hole, Wyoming, recently, several EM central bankers lined up to say that the US might actually be better getting on and raising rates sooner rather than later.