Emerging markets struggling with higher US interest rates are likely to get little sympathy from the Federal Reserve.
Emerging-market currencies have been hammered in a spreading selloff amid worries that their economies won’t cope with higher US borrowing costs. That’s prompted central bankers in India and Indonesia to urge Fed caution, while officials in Brazil are warning of challenging times.
There are few signs such concerns will steer the Fed away from its course for at least two and possibly three more rate hikes this year, including a move at its policy meeting next week.
Chairman Jerome Powell explicitly pushed back against criticism early last month in Zurich, saying the role of US monetary policy on foreign domestic financial conditions was “often exaggerated.” His colleague, Governor Lael Brainard, mentioned emerging markets in a May 31 speech, but spent far more time discussing the upside risks posed by fiscal stimulus.
“I don’t think they can change policy based on fear,” said Bricklin Dwyer, senior economist at BNP Paribas in New York. Emerging-market turmoil “is noise right now, justifiable noise. But does it shift the outlook for the US? The answer is, not yet.”
The US economy is powering ahead, adding over a million jobs in the first five months of 2018. Inflation is at the central bank’s 2 per cent target, and the Atlanta Fed’s gross domestic product tracking model suggests the economy grew a strong 4.5 per cent in the second quarter.
__________
Read more:
Dollar weakness replaced by dollar strength but how long will it last?
Emerging markets outlook: developing economies show resilience
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Even if exports are tempered by foreign economic woes, trade fights, and a somewhat stronger dollar, some $1.5 trillion (Dh7.4tn) in fiscal stimulus and a $300 billion increase in federal spending are supporting domestic US demand with “a huge tailwind,” said Torsten Slok, chief international economist at Deutsche Bank in New York.
The Fed is tasked with achieving stable prices and full employment. At 3.8 per cent in May, unemployment is already well below estimates of full employment and recent forecasts show officials expect a modest overshoot of their 2 per cent inflation target.
Meanwhile, the Fed’s benchmark lending rate is still low enough to stimulate growth, according to some measures, leaving officials with little choice but to keep raising it to a level that is more neutral in its impact on supply and demand.
It has also gone out of its way to communicate the plan for gradual rate increases and a shrinking balance sheet to avoid repeating the 2013 taper tantrum, when then-Fed Chairman Ben Bernanke surprised investors by suggesting the central bank might slow bond purchases.
Delaying policy tightening could also carry costs for emerging markets if it led to higher inflation that forced the Fed to act more aggressively, said Nathan Sheets, chief economist for PGIM Fixed Income.
“The Fed’s got to move,” said Sheets, a former US Treasury undersecretary for international affairs. Officials are probably asking themselves, “over time, are we going to serve the global economy well by not responding to inflation?”
There have been occasions in the past when the Fed has paused in response to international developments. In 1998, for example, then-Chairman Alan Greenspan led the committee to cut rates three times to offset effects of spreading financial turmoil.
Greenspan warned during that period that “it is just not credible” that the U.S. remain “an oasis of prosperity.”
Greenspan ‘Wrong’
“He was wrong,” said Joe Gagnon, a senior fellow at the Peterson Institute for International Economics in Washington and a former Fed economist. “He eased 75 basis points and the economy, if anything, accelerated and the tech economy really took off.”
The bubble in technology stocks eventually burst at high cost to the US economy.
In 2016, Fed officials set aside plans to raise rates four times over the year in reaction to financial-market turmoil triggered by concern over slowing Chinese growth. They hiked just once, but could also point to US inflation that was running too low as a reason for their caution.
The Fed’s preferred gauge of price pressures averaged just 1.2 per cent that year, while it hit 2 per cent on a 12-month basis in both March and April 2018.
Fed officials do have an eye on Europe and emerging markets, “but at the end of the day, look at the employment report” in May, when the US economy added 223,000 jobs, said Deutsche Bank’s Slok. “If anything, we should be worried about overheating, not a recession.”
COMPANY PROFILE
Name: Almnssa
Started: August 2020
Founder: Areej Selmi
Based: Gaza
Sectors: Internet, e-commerce
Investments: Grants/private funding
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MATCH INFO
Uefa Champions League quarter-final second leg:
Juventus 1 Ajax 2
Ajax advance 3-2 on aggregate
Challenge Cup result:
1. UAE 3 faults
2. Ireland 9 faults
3. Brazil 11 faults
4. Spain 15 faults
5. Great Britain 17 faults
6. New Zealand 20 faults
7. Italy 26 faults
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Call of Duty: Black Ops 6
Developer: Treyarch, Raven Software
Publisher: Activision
Console: PlayStation 4 & 5, Windows, Xbox One & Series X/S
Rating: 3.5/5
The specs
Engine: 2.7-litre 4-cylinder Turbomax
Power: 310hp
Torque: 583Nm
Transmission: 8-speed automatic
Price: From Dh192,500
On sale: Now
Haemoglobin disorders explained
Thalassaemia is part of a family of genetic conditions affecting the blood known as haemoglobin disorders.
Haemoglobin is a substance in the red blood cells that carries oxygen and a lack of it triggers anemia, leaving patients very weak, short of breath and pale.
The most severe type of the condition is typically inherited when both parents are carriers. Those patients often require regular blood transfusions - about 450 of the UAE's 2,000 thalassaemia patients - though frequent transfusions can lead to too much iron in the body and heart and liver problems.
The condition mainly affects people of Mediterranean, South Asian, South-East Asian and Middle Eastern origin. Saudi Arabia recorded 45,892 cases of carriers between 2004 and 2014.
A World Health Organisation study estimated that globally there are at least 950,000 'new carrier couples' every year and annually there are 1.33 million at-risk pregnancies.
SPECS
Nissan 370z Nismo
Engine: 3.7-litre V6
Transmission: seven-speed automatic
Power: 363hp
Torque: 560Nm
Price: Dh184,500
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Avatar%20(2009)
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Business Insights
- As per the document, there are six filing options, including choosing to report on a realisation basis and transitional rules for pre-tax period gains or losses.
- SMEs with revenue below Dh3 million per annum can opt for transitional relief until 2026, treating them as having no taxable income.
- Larger entities have specific provisions for asset and liability movements, business restructuring, and handling foreign permanent establishments.
Citadel: Honey Bunny first episode
Directors: Raj & DK
Stars: Varun Dhawan, Samantha Ruth Prabhu, Kashvi Majmundar, Kay Kay Menon
Rating: 4/5
The years Ramadan fell in May
Electoral College Victory
Trump has so far secured 295 Electoral College votes, according to the Associated Press, exceeding the 270 needed to win. Only Nevada and Arizona remain to be called, and both swing states are leaning Republican. Trump swept all five remaining swing states, North Carolina, Georgia, Pennsylvania, Michigan and Wisconsin, sealing his path to victory and giving him a strong mandate.
Popular Vote Tally
The count is ongoing, but Trump currently leads with nearly 51 per cent of the popular vote to Harris’s 47.6 per cent. Trump has over 72.2 million votes, while Harris trails with approximately 67.4 million.
How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
APPLE IPAD MINI (A17 PRO)
Display: 21cm Liquid Retina Display, 2266 x 1488, 326ppi, 500 nits
Chip: Apple A17 Pro, 6-core CPU, 5-core GPU, 16-core Neural Engine
Storage: 128/256/512GB
Main camera: 12MP wide, f/1.8, digital zoom up to 5x, Smart HDR 4
Front camera: 12MP ultra-wide, f/2.4, Smart HDR 4, full-HD @ 25/30/60fps
Biometrics: Touch ID, Face ID
Colours: Blue, purple, space grey, starlight
In the box: iPad mini, USB-C cable, 20W USB-C power adapter
Price: From Dh2,099
Day 3, Dubai Test: At a glance
Moment of the day Lahiru Gamage, the Sri Lanka pace bowler, has had to play a lot of cricket to earn a shot at the top level. The 29-year-old debutant first played a first-class game 11 years ago. His first Test wicket was one to savour, bowling Pakistan opener Shan Masood through the gate. It set the rot in motion for Pakistan’s batting.
Stat of the day – 73 Haris Sohail took 73 balls to hit a boundary. Which is a peculiar quirk, given the aggressive intent he showed from the off. Pakistan’s batsmen were implored to attack Rangana Herath after their implosion against his left-arm spin in Abu Dhabi. Haris did his best to oblige, smacking the second ball he faced for a huge straight six.
The verdict One year ago, when Pakistan played their first day-night Test at this ground, they held a 222-run lead over West Indies on first innings. The away side still pushed their hosts relatively close on the final night. With the opposite almost exactly the case this time around, Pakistan still have to hope they can salvage a win from somewhere.
Cricket World Cup League 2
UAE squad
Rahul Chopra (captain), Aayan Afzal Khan, Ali Naseer, Aryansh Sharma, Basil Hameed, Dhruv Parashar, Junaid Siddique, Muhammad Farooq, Muhammad Jawadullah, Muhammad Waseem, Omid Rahman, Rahul Bhatia, Tanish Suri, Vishnu Sukumaran, Vriitya Aravind
Fixtures
Friday, November 1 – Oman v UAE
Sunday, November 3 – UAE v Netherlands
Thursday, November 7 – UAE v Oman
Saturday, November 9 – Netherlands v UAE
MADAME%20WEB
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Kanguva
Director: Siva
Stars: Suriya, Bobby Deol, Disha Patani, Yogi Babu, Redin Kingsley
Company%20Profile
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Match info
Manchester City 3 (Jesus 22', 50', Sterling 69')
Everton 1 (Calvert-Lewin 65')
