In this article, we take a look at the recent policy shifts by the European Central Bank, the Federal Reserve and the Bank of Jamaica as well as the implications for your investment decisions.

Recent improvements in developed economies suggest that investors should watch their emerging market investments carefully. Rising interest rates in the US could lead to gradual fund outflows from emerging markets as the return differential between the two markets compresses.

Fund outflows can lead to depreciation of the local currency (and in turn reduced capacity to service foreign currency debt), less access to financing for local corporates, more expensive borrowing rates for local households and corporates, and a general decline in the prices of the bonds and equities within the economy.

The high levels of liquidity in the global markets may reduce the negative impact of these forces due to the high demand for financial assets. Nevertheless, investors should ensure their emerging market exposure is short in duration and focused on growing / profitable companies which generate at least part of their revenue from foreign currency.

ECB POLICY

This week, the ECB announced that it would reduce its current €60 billion per month asset purchase programme by €30 billion per month starting in January 2018. The programme is expected to continue until September 2018 or beyond, if necessary.

http://www.jamaicaobserver.com/sunday-finance/central-bank-policy-update-and-the-impact-on-your-investments_115311