“We have been watching closely the recent volatility in global financial markets. Our sense is that at this stage these developments do not pose a substantial risk to the U.S. economic outlook. We will, of course, continue to monitor the situation.”
This was the passing reference to the turmoil in emerging markets by the new chairwoman of the Federal Reserve, Janet Yellen. An increasing number of emerging economies are facing the risk of capital flight from global investors after the US Federal Reserve started its taper in January. (For her entire speech, click here.)
Anyone expecting Yellen to offer some comforting words to emerging markets, and perhaps, some form of support, will be sorely disappointed.
Basically, Yellen’s message to emerging markets was: “We know you’re facing problems, but you’re on your own.”
For further proof, here’s another extract of her comments to American lawmakers in a Marketwatch.com report:
“Well, certainly capital markets are global, and the monetary policies of any country affect other countries in such a world.
“But we’ve been very clear at the outset that we initiated our program of asset purchases and an accommodative monetary policy more generally to pursue the goals that Congress has assigned to the Federal Reserve, namely supporting economic growth and employment in the context of price stability.
We have tried to be as clear as we possibly can about how we would conduct this policy.”
There you have it, folks.
Emerging markets will have to fix their problems (current account deficits, stubborn inflation, currency flaps, etc) on their own. No help coming from the US anymore (in the form of easy money).
Tough luck, emerging markets.