LONDON: Emerging market policymakers slashed interest rates in August, taking their lead from major central banks including the US Federal Reserve and the European Central Bank and joining in efforts to shore up their economies.

Interest rate moves by central banks across a group of 37 developing economies showed a net 14 rate cuts last month — the largest number since policy makers ramped up measures to kick-start economic growth in the wake of the financial crisis.

In July, developing market central banks recorded a net eight rate cuts. Some of the August interest rate cuts — like in Mexico and Thailand — took markets by surprise.

Since April, Reuters found that all but four central banks around the world cut interest rates. The four that raised rates during this period are Pakistan, Zambia, Moldova, and the Czech Republic. Tunisia also raised its rates in February of 2019, its third hike in 12 months, to combat rising inflation.

The seventh straight month of net rate cuts follows a tightening cycle that ended in early 2019. Then, interest rate hikes by emerging market central banks outstripped or matched cuts for nine straight months as they battled the fallout from a strong dollar, rising inflation and softer currencies.

Central banks of other countries served up a few surprises with their rate cuts. On July 25, for example, the central bank of Turkey slashed interest rates by 425 basis points in one go, bringing them to 19.75 per cent, to spur a recession-hit economy. This was its first step away from the emergency stance adopted during last year’s currency crisis.

The Reserve Bank of India (RBI) lowered its benchmark interest rates for a fourth straight meeting on Aug 7 with a slightly bigger than expected cut, underscoring its worries about India’s near-five year low pace of economic growth.

The central bank, hoping it can spur faster growth at home despite a global slowdown, surprisingly cut its key interest rate for a second time in two months on Aug. 22.

Published in Dawn, September 3rd, 2019