Central banks of emerging countries trapped by rising food prices

Posted on Dec 8, 2019 2021 at 7:58Updated 8 Dec. 2021 at 17:27

The rise in food prices further complicates the equation for central banks in emerging countries (excluding China). The Covid 19 epidemic is far from over and their growth engines are seriously running out of steam. But their monetary institutes have their hands tied because of the rise in inflation. In Brazil, Russia, Romania, Poland, Hungary and Mexico, it is now far above the targets set by local central banks.

Transitory or not, in these countries the question does not matter. The return of inflation very quickly led many central banks to raise their rates. “There have been 32 rate hikes since the start of the year in emerging countries, mainly in Latin America, Europe (excluding Turkey) and Russia,” comments Irina Topa-Serry, senior economist at AXA IM. At the risk of stifling growth and increasing the borrowing costs of States, thus constraining their budgetary capacities. “Monetary policy must react more quickly and probably more strongly in emerging countries,” said the economist.

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