Delegates at the IMF meeting in Lima tell the Fed to get on with raising rates
The WSJ has a good roundup from the IMF meeting in Peru. The main sentiment from Lima is that most of the countries officials are now ready for the Fed to move and it's now the uncertainty of when that's doing the most damage to their markets
Emerging markets have been at the whim of Fed induced market moves for the last few years and many want an end to the uncertainty once and for all. Singapore's deputy prime minister said;
"This year, compared to a year ago, many emerging-market central bank governors and some others were keener that the Fed just get on with it, not because they were keen to see interest rates rise, but because they wanted to reduce uncertainty,"
Germany's Jens Weidmann said that the pain of EM's seeing capital outflow is no reason to delay a US rate hike and that it would be the reaction to a better economy and ultimately good news for the global economy
In addition to his other comments over the weekend, the Fed's Stanley Fischer acknowledged that after conversations this weekend, many emerging market officials feel suitably forewarned that the US is going to hike and want them to get on with it
Not everyone thinks that the first hike will be the end of market uncertainty or volatility. The head of South Africa's central bank, Lesetja Kganyago said uncertainty is the permanent feature now
Perhaps the best analysis comes from Carlos Fernandez Valdovinos, Paraguay's CB head. Speaking about the shifting expectations over FOMC meetings he said;
"Everyone talked about September, then they were talking about December. Right now, here, after this meeting, everyone is talking about January."
"How do you prepare for such a hazy outlook? I think the word for me is be smart, be wise, know your limits,"
If USDJPY is the biggest proxy for current rate expectations then the lack of decent price moves tells the story. The market is felling lethargic over when the Fed raises. It knows a hike is coming and it's had enough trading the exact date. As such the reaction when they do should be less volatile and maybe that's what the Fed has been working towards
While we may only see the first hike as something that's very small, the effects on global flows could be huge as the money floods out of EM's and into the US. A lot of that has probably already happened but there will always be late comers. The Fed hike is still a bigger deal to other countries than it may be in the US but the Fed US can feel those after effects just as much
The fill story from the WSJ is here
