The Federal Reserve’s monetary policy: Good news for emerging countries

It is very likely that the Federal Reserve is going to cut its interest rates, for various reasons: the risk of a cyclical slowdown, low inflation, the desire to prevent an appreciation of the dollar. A reduction in US interest rates is good for emerging countries for several reasons: It reduces the cost of their dollar-denominated debt; It makes the United States less attractive for capital flows, leading more capital to flow to emerging countries; In emerging countries, this usually leads to exchange rate appreciation, lower inflation and lower interest rates, which is good for growth. Investors should therefore become more positive about emerging countries as the Federal Reserve cuts its interest rates.