If emerging markets are to lead global economic performance one again as they did in recent years, an important foundation will be to convince as many people as possible that reported growth data are as accurate as they can possibly be.
If the most populous country in the world, as well as the largest consumer of raw materials, starts shying away from imports, that means global demand and, by extension, the world economy is taking a real hit.
The Federal Reserve increasingly looks stuck on the horns of a not-so-bullish dilemma: should it pay attention to global developments in financial markets, which argue for pause, or should it focus squarely on U.S. economic data, which suggest the time is nigh to hike?
The latest euro zone flash purchasing managers’ indexes may have surprised slightly on the higher side, but many are still not convinced that better economic growth is coming later this year.
Expectations may have been pushed to later this year for when the U.S. Federal Reserve will hike interest rates, but a repeat of another steep sell-off in emerging market stocks appears unlikely as much has already been priced in – and because of the stronger dollar.
Currency concerns in the central banking world have come to the fore again.
Sweden cut interest rates further into negative territory out of the blue last week, fearing its strong currency will engender deflation. The Swiss National Bank said it would aim to weaken what it sees as a “significantly overvalued” franc. And the Bank of England flagged the risk that sterling could strengthen further and leave inflation below target for longer.
Russia’s central bank meets having unexpectedly cut its key policy rate in January by 200 basis points to 15 percent, raising a question mark over its independence from political pressure, given inflation rose to a 13-year high of 16.7 percent in February.