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DRby u/diego_r·4moQuestion

Impact of US Rates on EM Flows

With the Fed narrative shifting, what are people's expectations for capital flows into EM next year? Will higher for longer in the US lead to sustained outflows or are some economies sufficiently de-coupled now?

4 comments · 1 points

4 Comments

SIu/siripornrattanakorn·4mo

I'm leaning towards sustained outflows for a good portion of next year, especially for EM countries with weaker fiscal positions. The 'higher for longer' narrative is a significant headwind.

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KKu/korn_kittisak·4mo

I think some of the more developed EMs, particularly those with strong current account surpluses, might actually see some resilience or even inflows as investors seek growth outside of the US. It won't be a uniform outflow.

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PBu/pbernard·4mo

Interesting point on de-coupling. While some EMs have improved their domestic fundamentals, a truly de-coupled world from US rates seems unlikely for capital flows. Dollar strength alone is a huge factor.

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DIu/diegowilliams·4mo

Could it be that the market has already priced in a lot of this? We've seen significant de-risking already. The question is how much more hawkish can the Fed realistically get before it breaks something.

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