Developing Countries Brace for Impact From Fed Rate Increases




Central bankers in developing countries have been ratcheting up interest rates for months, seeking to stay ahead of a rise in U.S. rates that could destabilize their economies by pushing up their own cost of debt, weakening their currencies and driving capital out of their markets and into higher-yielding U.S. securities.

Now, the Fed is expected to raise rates anywhere from four to seven times this year. If successful in taming inflation, the Fed could help central banks everywhere, because a turbocharged U.S. economy, huge government stimulus and a splurge by Americans on everything from toys and household appliances have snarled supply chains and driven inflation higher world-wide.

Until now, overseas central banks have found it difficult to get on top of the inflation surge withthe Fed sitting on the sidelines. But with the Fed now poised to join the battle, some say the prospects of success are greater.

Author(s): Paul Hannon

Publication Date: 8 Feb 2022

Publication Site: WSJ