Investment Institute
Macroeconomic Research

Emerging markets inflation: Characteristics, causes and effects

  • 28 July 2022 (7 min read)

Key points

  • Global factors have put upward pressure on inflation rates across emerging market (EM) economies
  • EM economies’ characteristics have exacerbated the shocks including greater spending on food and energy, weaker anchored inflation expectations and more exchange rate pass-through. Tight labour markets are also important
  • EM central banks have tried to preserve credibility and anchor inflation expectations by front-loading rate hikes. This risks sacrificing activity.
  • Inflation should decelerate slightly into the year-end before adjusting more into 2023 and beyond. Policy mix is likely to remain in a tighter mode hindering economic convergence.
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