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More Rate Hikes in Emerging Markets

(Harvest) There are further signs that central banks in emerging markets are turning hawkish—all the more so because global risks remain elevated and uncertainties abound. The Czech National Bank (CNB) is on a tightening spree, going for a second 25bps rate hike in a row and being a poster-child for the newly-found hawkish policy bias in emerging markets. The CNB’s argument is that there are fundamental price pressures related to the tight labor market and that the currency’s weakness might add to the second-round inflation effects down the road. CNB Governor Ji?í Rusnok said that more tightening should not be ruled out, and this sentiment is fully shared by the market.

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