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Published on Monday, September 19, 2022

Peru | At the pace of the FED: will it be different this time?

In the last 30 years, some Latin American economies have developed macroeconomic strengths that will help them face the financial turmoil caused by the Fed's monetary tightening

Key points

  • Key points:
  • The rearrangement of market expectations in the face of the process of raising the monetary policy rate that the FED has been carrying out has induced great volatility in the prices of assets and currencies at a global level.
  • In the past, aggressive monetary adjustments implemented by the FED generated great tensions in the financial markets of Latin America. It is enough to remember that the upward cycle of the FED rate in the early 1980s triggered the Latin American debt crisis that led to a long period of stagnation in the region (“the lost decade”).
  • Many things have changed for the better in the region: independent central banks (with the objective of price stability), better capitalized and supervised financial systems, flexible exchange rates and stronger public finances.
  • Of course, this new upward cycle of the Fed's rate will continue to stress the financial markets of the region. But the best foundations available today will help weather the storm.

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