Last year, a combination of recovering but still below-potential growth and falling inflation allowed the central banks of many emerging markets (EM) to continue easing their monetary policy, even as developed market (DM) central banks, led by the US Federal Reserve (Fed), were shifting into tightening mode.
While appearing to leave EM local currency debt and currencies (FX) more vulnerable compared to last year, from a macroeconomic perspective, emerging markets remain in a sweet spot of historically low and contained inflation and a growth recovery that is still catching up to the more mature growth cycle in developed markets.
