EM assets “hi-fived” the data-driven message from the U.S. Federal Reserve. Still, local policies can make a lot of difference – even during the “everything rally”.
A prospect of more policy support in China is overriding weaker-than-expected activity gauges, while Brazil’s solid macro indicators are overlooked due to policy concerns.
Stronger employment indicators in the U.S. challenge the market rate expectations. Upside inflation surprises and policy concerns play a similar role in EM.
The global disinflation narrative is firmly in the “how fast” stage, but the progress is uneven, and some EMs might need to err on the cautious side and hike a bit more.