Emerging Markets Macro and Strategy Outlook

- "There are three possible explanations for this big change in view about the path
of interest rates."
- "Growth prospects are not a major part of our story of diminished rate hikes."
- "Diminished inflation risks offer a better explanation of the collapse in our rate
views, but even this isn’t quite convincing."
- "Perhaps the strongest argument in favour of disinflationary forces in EM comes
from the food market."
- "Putting this altogether: a low interest-rate environment in the G3, together with
an EM story that combines closing output gaps and few inflationary pressures,
should be pretty supportive for capital flows to EM in our view."
-"For these reasons we remain relatively optimistic about emerging markets
currencies, albeit that we are in a “one-trade” world."


Citigroup Emerging Markets Macro and Strategy Outlook June2010