After an unprecedented period of rate cuts to prop up economies shattered by Covid-19, Brazil is expected to raise rates this week and Nigeria and South Africa could follow soon, according to Bloomberg Economics. Russia already stopped easing earlier than expected and Indonesia may do the same.
Behind the shift: Renewed optimism in the outlook for the world economy amid greater U.S. stimulus. That’s pushing up commodity-price inflation and global bond yields, while weighing on the currencies of developing nations as capital heads elsewhere.
The turn in policy is likely to inflict the greatest pain on those economies that are still struggling to recover or whose debt burdens swelled during the pandemic. Moreover, the gains in consumer prices, including food costs, that will prompt the higher rates may exact the greatest toll on the world’s poorest.