U.S Anchors Economic Recovery on Accommodative Monetary Policy Stance 

The Federal Open Market Committee (FOMC) of the U.S. Federal Reserve judged that a highly accommodative stance of monetary policy was warranted in order to foster a stronger economic recovery and sustained improvement in labour market conditions in a context of price stability. The FOMC said it will start unwinding the QE once the inflation rate in the U.S. hits 2.5 percent and the unemployment rate drops to 6.5 percent. The latest inflation rate as at July is two percent, while the latest unemployment rate is 7.4 percent.
In our opinion, the unwinding of QE is imminent, as the U.S. economy may not afford the costs associated with the exercise on a sustainable basis. It is therefore imperative for individual emerging market economy to prepare for this. Political and economic reforms in the emerging market economies may enable them withstand the possible shock that may be associated with the capital reversal as the unwinding of the QE sets in.

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