Emerging markets inflation: Characteristics, causes and effects
- Global factors have put upward pressure on inflation rates across emerging market (EM) economies
- EM economies’ characteristics have exacerbated the shocks including greater spending on food and energy, weaker anchored inflation expectations and more exchange rate pass-through. Tight labour markets are also important
- EM central banks have tried to preserve credibility and anchor inflation expectations by front-loading rate hikes. This risks sacrificing activity.
- Inflation should decelerate slightly into the year-end before adjusting more into 2023 and beyond. Policy mix is likely to remain in a tighter mode hindering economic convergence.