Emerging markets are full steam ahead LONDON EYE
After the U.S. Federal Reserve’s awaited Federal Open Market Committee (FOMC) minutes confirmed that a June rate hike remains firmly on the table, the progress toward reducing the size of the U.S. central bank’s balance sheet remained unclear in investors’ minds. The minutes also revealed that the Fed is increasingly uncertain regarding the inflation outlook.
“Policymakers agreed that the committee’s policy normaliza- tion principles and plans should be augmented soon to provide additional details about the operational plan to reduce the Federal Reserve’s securities holdings over time,” the minutes said.
While most FOMC members consider the recent soft inflation data as transitory, a few did express their concern that progress towards the Fed’s target may have stalled.
At this point, the majority may still support a rate hike in June. But for now, investment in emerging market assets is expected to continue. As the analysts cited below argue, the imminent rate rise will not cause a disruption in emerging-market flows. While the music is playing, let the markets roll.