Fitch warns of emerging market shock if Fed sticks to rate plan

Emerging markets have accumulated $7.5 trillion of external debt and are acutely vulnerable to a rapid rise in US interest rates, regardless of whether they borrowed in dollars or their own currencies, Fitch Ratings has warned. The credit agency said international markets are pricing in a much slower pace of US monetary tightening than the US Federal Reserve itself, risking a potential financial upset in East Asia, Latin America and Africa if Fed hawks refuse to bow to market pressure over the next two years. Fitch said the Fed has signalled a rise in rates to 3.8pc beyond 2017 but investors simply refuse to believe that this will happen, with futures contracts implying rates of just 1.4pc over the same span – an unprecedented gap of 240 basis points, and one that is fraught with risk. To read more click the (VIEW LINK)