Fed Tightening May Squeeze Portfolio Flows to Emerging Markets
By Robin Koepke
December 14, 2017
Versions in 中文 (Chinese), Español (Spanish), Français (French), 日本語 (Japanese), Русский (Russian)
Derivatives traders in Singapore: Tighter Federal Reserve monetary policy is likely to reduce overseas purchases of emerging market stocks and bonds (photo: Caro/Rupert Oberhaeuser/Newscom)
A key question facing global investors today is what impact the US Federal Reserve’s monetary policy normalization process will have on capital flows to emerging markets. The IMF’s new model estimates show that normalization—raising the policy interest rate and shrinking the balance sheet—will likely reduce portfolio inflows by about $70 billion over the next two years, which compares with average annual inflows of $240 billion since 2010. […]