LONDON, Feb 3 (Reuters) - Central banks in emerging markets are under growing pressure to increase interest rates in order to support their currencies and head off inflation caused by weaker exchange rates.
While some countries such as Brazil and Indonesia were already in rate-tightening mode, others such as Hungary or Thailand may be forced by markets into reversing hitherto dovish policies.
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Following is a list of countries that have raised interest rates or are expected to do so in the face of an accelerating exodus of foreign investors:
TURKEY - raised all its interest rates on Jan. 29, moving its overnight lending rate to 12 percent from 7.75 percent, its one-week repo rate to 10 percent from 4.5 percent, and its overnight borrowing rate to 8 percent from 3.5 percent.
The bank has said it may tighten liquidity further if necessary but believes its current policy stance will be enough to anchor inflation expectations. It is estimated to have spent more than $5.5 billion last month on dollar auctions and direct currency market interventions.
SOUTH AFRICA - raised interest rates for the first time in almost six years on Jan. 30, increasing the repo rate by 50 bps to 5.50 percent. The South African Reserve Bank said the move was aimed at taming inflation rather than defending the exchange rate.. Markets are pricing more than 150 bps of hikes over the next six months.
INDIA - surprised markets by raising interest rates by 25 bps on Jan. 28 to 8 percent, to dampen inflation and prepare for the risk of major capital outflows.
BRAZIL - raised interest rates by a bigger-than-expected 50 bps to 10.50 percent on Jan. 15 and the central bank has signalled it may not be ready to slow an aggressive rate hike cycle because of stubbornly high inflation. It has raised rates by 325 bps since last April.
NIGERIA - lifted cash reserve requirements on public sector deposits held by banks on Jan. 21 by 25 bps to 75 percent, reflecting its concern about naira weakness though it kept key interest rates at 12 percent. The naira has been trading above the target 150-160 per dollar band and analysts expect rates to rise 100 bps later this year.
INDONESIA - kept interest rates steady on Jan. 9 at 7.50 percent but pledged vigilance over capital outflow risks. The central bank has raised rates by 175 bps since last June and is expected to do so again this year.
THAILAND - kept interest rates on hold on Jan. 22 though most analysts had expected a cut to follow 25 bps easing in November. The central bank voted 4-3 to keep the rate at 2.25 percent, reflecting its worry that the country’s political crisis could trigger capital outflows.
HUNGARY - surprised markets by cutting interest rates to a record low of 2.85 percent on Jan. 21. But the forint’s recent weakness has caused interest rate markets to price rate hikes of over 150 bps in the next 12 months, compared with expectations for little change two months ago.
RUSSIA - is estimated to have spent $10 billion in currency interventions but could be forced into policy tightening should the rouble - down 5 percent already this year - go much further. That has potential to trigger panic among the population and a run on banks. The rouble slide will also complicate the inflation picture, with the central bank aiming to bring inflation down to 5 percent this year.
MEXICO - held interest rates steady at 3.5 percent on Jan. 31 but warned that peso depreciation may affect inflation which is already above the central bank’s 4 percent upper limit. Governor Agustin Carstens said the central bank was weighing whether monetary policy needed adjusting.
UGANDA - is expected to keep rates unchanged this week despite falling inflation, in order to support the shilling.
GHANA - released $20 million into the interbank market last week to stabilise the cedi, Bank of Ghana officials said. As of Jan. 6, the central bank requires all commercial banks “to actively” quote a two-way pricing of currency exchange and limit spreads on corporate transactions to a maximum 200 bps. (Compiled by Sujata Rao; editing by David Stamp)