Economics: An EM monetary policy tipping point?

EM rate cycles have diverged   widely since mid-2021

Some weaker EMs have   lost control of their monetary conditions. Meanwhile, rate cycles in some   stronger EMs, mostly in Asia, are lagging those of the major DMs. But most   EMs hiked rates early in this cycle, often aggressively.

The early hikers are at or near the peak of their rate   cycle

Policy rates in the   early-hiking countries are now well into restrictive territory, and inflation   is expected to ease for most in the near term. The market is now starting to   discount rate cuts next year for many of the early movers.

But the scope to cut rates may be limited well into   2023

Food price increases   may have kick-started this cycle, but lower grocery bills probably won’t be   enough to end it. Inflation expectations are above target in most countries,   and global financial conditions are likely to constrain most EM central   banks.