Emerging Markets Briefer

The credibility game

Tue, Jun 3 2008, 08:37 GMT
by Danske Research EmergingMarkets Team

Danske Bank A/S


The central bankers’ dilemma

  • • Rising inflation and slowing growth: A key dilemma for EM central banks.
  • • It is not a given that all EM central banks will do the right thing.
  • • Some will fight inflation, but others will cave into political pressure and abandon the fight to secure low inflation.
  • • This should be reflected in market pricing, but has probably not yet happened.

The Ukrainian inflation farce – will it be copied?

  • • The Ukrainian central bank (NBU) is a good example of a central bank that has failed to fight inflation. Inflation is now running at above 30% y/y.
  • • The NBU has recently tried to curb inflation by letting the Ukrainian Hryvina appreciate. However, this has led to a dispute between the NBU management and the NBU’s Council. This clearly illustrates the problems of political interference in monetary policy.

Published on  Tue, Jun 3 2008, 08:42 GMT

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