EM central banks have now become extremely dovish since the worldwide financial crisis, as per an analysis.
The pro-easing partiality is quite remarkable given that the banks, which includes those of India, Russia, Brazil, Turkey and South Africa have lowered rates already this year, indicating that scope for additional policy loosening likely should be shrinking.
The Emerging Monetary Mood Indicator by BAML (Bank of America Merrill Lynch) is at the most dovish extreme state since the 2009 crisis.
Based upon figures of a single month, the latest August reading was the most dovish since the dotcom depths crash in the year 2000.
There are some emerging markets in which the central banks may cut rates more than what the market is actually expecting, said BofA’s David Hauner.
According to him, the market isn’t pricing rate cuts aggressively and that the real rates in the emerging markets still are pretty high.
Turkey is leading the way among the major emerging market central banks in the current year, cutting base rates to 16.5%, while India reduced to 5.4%. Since the beginning of 2017, Brazil has reduced base rates to 6% while Russia has slashed to 7%.
The monetary authorities now are reacting to the faltering growth. The IMF has forecasted that emerging market wide growth will reduce to a post-worldwide financial crisis moderate of 4.1% this year.