Emerging markets saw more interest rate hikes in June as a hawkish pivot from the U.S. Federal Reserve amplified inflationary pressures in a number of developing economies. Policymakers across a group of 37 emerging market central banks delivered a net five interest rate rises in June after a single increase in May.
A raft of major central banks raised rates in June and many flagged an accelerating pace of hikes in the months to come.
Brazil delivered its third consecutive increase of 75 basis points while raising the spectre of larger hikes ahead as it returns to “neutral” rates, dropping plans for a “partial” normalisation of policy. Russia’s central bank raised its key interest rates by 50 basis points to 5.5% and said more was needed to rein in high inflation, eyeing potentially a 100 bps increase in borrowing costs in July.
Mexico surprised markets, hiking by 25 basis points to 4.25% just days after the Fed turned more hawkish. Policymakers said the move was necessary to avoid adverse effects on inflation expectations and cited price formation in the United States, though the bank’s deputy governor suggested there could be a long pause to wait for its northern neighbour to hike.