State Bank of Pakistan (SBP) Governor Dr Reza Baqir has warned thatemerging markets are vulnerable to a taper tantrum-style shock if advancedeconomies do not act sooner to manage rising global inflation,reported the *FinancialTimes*.
His statement comes on the heels of the central bank adopting a moreaggressive stance, raising the key interest rate by 150 basis points totake it to 8.75% — the highest since April 2020. The decision comes amidhigher inflation in Pakistan that has gone over 9%, with hike in globalenergy prices cited as among the top reasons.
His remarks signal growing unease among developing-economy policymakersthat central bankers in rich countries are not doing enough to rein inpandemic-era monetary stimulus and combat rising prices, added the report.
This will disproportionately hurt developing countries if foreign investorsend up dumping emerging and frontier-market assets owing to unexpectedinterest-rate rises in advanced economies, Baqir said in an interview withthe *Financial Times*.
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Central banks, much like Pakistan’s, are under pressure to wind back thestimulus programmes introduced during the coronavirus pandemic overconcerns that easy money was fuelling sustained global inflation.
Policymakers and investors fear that inaction could spark a repeat of the2013 taper tantrum when the US Federal Reserve’s signalling of stimuluswithdrawal sparked an emerging market sell-off.
