Though this week’s FOMC statement is still being parsed, market participants generally expect the Federal Reserve to raise policy interest rates this September. In contrast, the European Central Bank has significantly eased monetary policies over the past year and is expected to maintain accommodative policies for a substantial period of time. Should emerging markets fear the consequences of the so-called Fed liftoff and the likely increase in U.S. long-term bond yields?
Analysis in the IMF’s latest Spillover Report suggests the answer is “no”.
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