“It is not yet time to remove accommodation.”
Hallelujah! That’s what emerging markets want to hear. The comment is significant because it came from Charles Evans, president of the Chicago branch of the Federal Reserve, according to media reports.
Global financial markets have been on tenterhooks ever since Fed chief Ben Bernanke mentioned in May the possibility of gradually “tapering” or winding down monetary stimulus measures now widely known as QE3. Over the past few years, investors have taken advantage of cheap cash in the U.S. and invested those funds in emerging markets. The fear of the Fed closing the money spigots has already led to outflows totalling $12.2 billion from emerging market equity funds in the quarter ending September, according to data from EPFR Global, a funds tracking company.
Evans believes the recent fiscal drama in the US could have possibly postponed the tapering plan. Emerging markets can breathe a sigh of relief – for now.