John At The Center

Investors are concerned that emerging market central banks might be forced to tighten monetary policy quickly to keep a lid on the build-up of inflationary pressures.

“Although central banks are right to introduce policies to restrain inflation, they must not tighten too far, too fast,” says Nigel Rendell, senior emerging market strategist at RBC Capital Markets.

Significant rate increases are being forecast in Brazil, Turkey, Mexico and India. Brazilian forward markets are pricing in a 256 basis point rate increase to 11.50 per cent by the end of the year.

Turkish markets, meanwhile, are pricing in a 186bp rise to 9.05 per cent and Indian markets a 119bp increase to 4.66 per cent. Mexican markets are currently pricing in a 115bp rise to 5.81 per cent by the year-end

via FT.com / Emerging Markets – Emerging market rate risk unnerves investors.