...Market Turmoil Stresses EMs: Recurring bouts of volatility in credit markets since the "taper tantrum" of 2013 suggest a strong connection between market expectations about US monetary policy and investor risk appetite towards emerging markets (EM). Fitch Ratings' research finds evidence for this in the data. Fed on Launch Pad: Fitch Ratings expects the US Federal Reserve to raise rates before the end of 2015 in what will be the first rate hike for eight years. The rise has been well-signalled, and we expect the pace of tightening will be slow compared with previous cycles ¡ with the Fed Funds rate averaging 1.1% in 2016 and 2.3% in 2017. However, there is a substantial gap between the pace of rate hikes envisaged by the Fed and what the market has priced in. An outcome closer to the Fed's own guidance would be a shock to the markets. EMs Exposed to Fed: A close look at credit spreads back to 1996 suggests EM borrowers have become more exposed to an impact on their funding conditions from...
