Monday, July 4, 2011

Will emerging nations repeat developed world’s slump?

Fund Strategy - By Nick Rice

Most coverage of last week’s annual report from the Bank for International Settlements (BIS) focused on its criticisms of ultra-loose monetary policy in the developed world. The report’s implications, however, are broader and potentially more troubling.

As the bank to the world’s central banks has noted, the developed world has maintained near-zero interest rates and bought hundreds of billions of pounds of assets since the financial ­crisis, unleashing a flood of liquidity. A good deal of this has surged into emerging markets and prompted inflation. In the developing world, where growth and inflation are higher, rates and yields are also higher, and more attractive for investors.

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