MAMELLO MATIKINCA: Global and emerging markets running in opposite directions
All indications are that we will waste opportunities provided by advantageous global factors
Central banks around the world have come into focus of late given how each has responded to an improving global backdrop, weighed against idiosyncratic domestic factors. Developed markets are leaning towards monetary policy tightening, rolling back stimulus, and balance sheet reduction after years of ultra-accommodative conditions, and as deflation concerns begin to recede. In contrast, emerging markets are broadly heading in the opposite direction, more inclined to ease policy rates as their currencies recover, inflation slows and economic growth remains weak. South Africa is a good example of the latter. The Reserve Bank's monetary policy committee cut rates by 25 basis points at its July meeting, justified by the lowering of both inflation and growth forecasts. And there may well be more rate cuts to come as the bank does its bit to shield South Africa against even lower growth in the brief window between now and the middle of 2018, when a local currency sovereign credit downgrad...
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