FED Rate Hikes 2022-2023

The US dollar has become the dominant and the de facto global reserve currency as the world’s most widely used currency for international trade and transactions.

Unfortunately, when the US is hurting, the pain spreads out across the world.

This also means that when the US is facing major inflationary pressures, such as what we have been seeing over the past year, and decides to continue increasing interest rates to bolster the US dollar, it simultaneously weakens emerging market currencies.

We learned from the IFC’s Kareem Aziz, that this leaves many emerging markets vulnerable, and likely negatively affects emerging markets disproportionately. “Unfortunately, until the US gets a hold of inflation, the continued increase in interest rates will lead to vulnerabilities in markets like Nigeria, Turkey, Egypt and Pakistan.”