Implications for Emerging Markets from a hawkish Fed: The MUFG Global Markets Podcast

The US Federal Reserve kicked off discussions on tapering its balance sheet this week with new dot plots indicating two hikes by the end of 2023, which - in conjunction with upward revisions to inflation expectations and confident talk on employment - construe a hawkish FOMC surprise, relative to expectations.

Ehsan Khoman, Head of Emerging Markets Research (EMEA), believes that whilst EMs are broadly better positioned compared to the last taper tantrum episode in 2013, they are not immune to spillovers from higher US rates and a stronger US dollar.

However, he contextualises why there are reasons to remain constructive on the EM story in the second half of 2021.

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