Powell said Fed can’t be blamed for roiling emerging markets
Here’s the issue: The decisions the US Federal Reserve makes effect the rest of the world.
But here’s the other think: That’s not the Fed’s mandate, nor its problem.
That was basically the message from the Fed’s Powell today, although it was delivered with a bit more diplomacy. In Zurich, he said the Fed can’t be blamed in part because US decision-making isn’t the major determinant of flows into developing economies.
He also gave a vote of confidence for emerging markets:
“There is good reason to think that the normalization of monetary policy in advanced economies should continue to prove manageable for EMEs,” Powell said at an IMF even. “Markets should not be surprised by our actions if the economy evolves in line with expectations.”
The important takeaway for FX traders in his comments is that trouble in emerging markets isn’t going to dissuade Powell from hiking.