Emerging Market Central Banks Raise Rates to Combat Iran-War Inflation, Ahead of Developed Economies

According to Jin10, at least 10 emerging market central banks have raised interest rates since late February as Iran-related tensions reignited inflation concerns, moving faster than most developed economies. Indonesia, Rwanda, South Africa, and Sri Lanka tightened policy in the past two weeks, while the U.S., eurozone, Japan, and Canada have held rates steady; Norway and Australia are among the few developed nations raising rates.

Emerging market central banks are tightening to support their currencies and prevent capital outflows. The moves reflect lessons from the previous global tightening cycle, when emerging market central banks acted ahead of developed counterparts to combat post-pandemic inflation. More rate hikes from emerging markets are expected.