Emerging Market Central Banks Slash Rates Amid Global Uncertainty
In July, emerging market central banks enacted significant rate cuts totaling 625 basis points, the largest since 2022, influenced by decisions in Turkey and Russia. In contrast, developed markets held their rates steady amid global economic uncertainty caused by U.S. trade policies. Some divergence in inflation rates was noted between regions.
In an unprecedented move, emerging market central banks slashed interest rates by 625 basis points last month, marking the largest rate cut since 2022, according to data reviewed by Reuters. Central banks in Turkey led the reductions with a 300-basis-point cut, followed by a 200-basis-point cut in Russia. Other nations including Indonesia, South Africa, Malaysia, Poland, and Chile reduced rates by 25 basis points each.
This contrasts sharply with the strategy employed by central banks in developed economies, where rates remained unchanged amidst uncertainty triggered by U.S. trade and tariff policies. Economists noted divergent inflation stories across developing economies, with countries like South Africa and Turkey tackling distinct challenges such as new inflation targets and currency stability.
Despite a relative calm in developed markets, where the Federal Reserve and others maintained current rates, future movements are expected. Analysts anticipate that September could see policy changes from major players like the Fed, as they navigate the evolving global economic landscape.
(With inputs from agencies.)
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