VanEck Blogs | Emerging Markets Debt Daily

Asian central banks prefer to play it safe, ignoring an occasional upside surprise in activity gauges. Brazil, however, is expected to hike by 100bps today and follow up with more in the coming months.

The gap between DM and EM PMIs widened in July, but activity outcomes for individual EMs differ, and this means different policy outcomes. 

China’s latest activity gauges were not great, raising concerns about the near-term growth outlook. Some remedial policies are already being implemented, but more support might be needed going forward.

As we wait for the next batch of China’s activity gauges, the Politburo expressed concern about the growth outlook and signals more fiscal support. Peru’s politics spooked the market—and some questions are still unresolved.

A tame Fed provided a much-needed market respite, and EM with strong policy frameworks are set to benefit. As this happens, be mindful of EM policy “contagions” of another kind, which can be less forgiving.

The vaccination gap between EM and DM is the main reason why the IMF lowered its 2021 growth forecast for EM. The IMF also expressed concerns that inflation risks can prove more persistent.