Macro Dashboard

CEIC Gallery/World Economy - January 25, 2016 (Data from CEIC Gallery which is a collection of macroecomonic templates to cover the world economy, emerging economies, thematic analysis and hot topics) World Economic Overview As in a global village, the change in the economy of a country, especially the developed countries, can affect the rest of world. As such, we have Fed Interest Rate Hikes, Currency Crises Monitor and Medium Grade Economies. Key Indicators in this section, which display how the economies associate with each other. The latter two templates allow users to make comparison among countries. Fed Interest Rate Hike - World Federal Open market Committee (FOMC) decided to end the seven-year period of near-zero interest and raised the Fed's benchmark interest rate for the first time since 2006. According to Chair Janet Yellen the interest rate raise in December would be followed by "gradual" tightening and further adjustments in the stance of montary policy if economic activity continues to expand and labour market continues to strengthen. However, despite positive trends in the labour market and the unemployment rate reaching pre-crisis levels, the increase in economic activity, investments and domestic demand remain insufficient. Also, the FOMC’s main concerns remain the low levels of inflation and inflation expectations as in 2015 the annual inflation remains lower than the FOMC’s long-run objective. While the low inflation is partly reflecting the record-low oil prices, the core inflation measures adjusted with food and oil prices also indicate inflation rates far below the 2% target rate. Medium Grade Economies. Key Indicators - World Economy Medium risk economies, countries with an "investment" credit rating, but not graded with "high" or "prime" ratings, would be among the most affected by the Fed's monetary policy tightening. Over the past few years, these countries have benefited from the near-zero interest rates in the Unites States and other developed economies as they have attracted considerable investors' attention due to their high yield on investments with relatively low risk. Now, as Fed's monetary policy tightening has strengthened the US dollar and turned capital flows back to the US financial market, medium risk economies are struggling with substantial capital outflows and in most cases sharp currency depreciation. In order to protect their currencies and prevent deeper capital flight, central banks are pushed to to raise interest rates, which on the other hand puts pressure on economic growth and makes them potentially risky places to invest. Currency Crises Monitor- Thematic Analysis Over the past year currency depreciation in many emerging economies have brought back memories for the crises in Asia and Latin America two decades ago as Fed's monetary policy, oil prices collapse and China's downturn have unleashed the highest selling pressure on the national currencies of Brazil, Malaysia, Russia and many others since 1997-1998. Falling commodity prices and decreasing exports of the oil-exporting countries have reduced their foreign reserves to historically low levels, which affected the confidence in the national currencies. On the other hand, capital flight from emerging countries triggered by Fed's tapering and interest rate hike and central banks' interventions on the foreign exchange markets in order to protect their currencies have put additional downward pressure on foreign reserves, which made emerging markets' currencies more vulnerable to external shocks and opened door for speculative attacks. *Exchange Rate Market Pressure Index (EMPI) is defined as a weighted sum of annual change in exchange rate against USD and international reserves. Positive (negative) index indicated selling (buying) pressure on the currency. Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. Back to Blog

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