PIE - Chart Of The Moment: Emerging Market 2-Year Rates Near Historical Highs

• In several emerging markets, rates at the shorter end of the curve are trading at the highest levels in 20 years.
• Several emerging market central banks have tightened policy rates significantly earlier and substantially more than their developed market counterparts.
• While most emerging markets are struggling with inflation, the commitment and ability to control it will depend greatly on the country.

In several emerging markets, rates at the shorter end of the curve are trading at the highest levels in 20 years. For example, as the chart depicts, current 2-year rates compared to the 20-year median for developing countries like Colombia, the Czech Republic, Chile, and Hungary are significantly higher than developed markets like the U.S., Canada, and the eurozone. Looking back 20 years ago, emerging markets had not demonstrated their inflation-fighting credentials. Fast forward to today, several emerging market central banks have tightened policy rates significantly earlier and substantially more than their developed market counterparts. As Senior Research Analyst Alberto Boquin and Senior Vice President - Investment Specialist Katie Klingensmith discuss in our latest podcast on emerging markets , the moment we start seeing policymakers' inflation-fighting tactics, which include policy rates and a number of other measures, yield the intended results and successfully manage inflation, we could start to see emerging markets outperform. While most emerging markets are struggling with inflation, the commitment and ability to control it will depend greatly on the country.

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