by Andreas Hoffmann

While the US, Japan and Europe slashed interest rates to unprecedented low levels, growth remains sluggish. Dealing with debt problems and supporting the recovery, the ECB provided money to quasi-finance the euro area problem children. Similarly the Federal Reserve is trying to jump start the economy and has been flooding markets with money so that they have no idea about what to do with all the liquidity.

But – wait – there are emerging markets. They are booming from Brazil to Turkey. Hence, investors target emerging market asset markets until there is something to gain at home. As a consequence Poland and Brazil just raised interest rates to fight inflationary pressure in goods and asset markets. On the contrary, while inflation picks up (expected rate for 2011 is 5.9 percent), Turkey LOWERED interest rates and raised reserve requirements.

This might seem odd? Continue reading →