Decisions made by central banks in emerging economies have calmed the markets for now, but the fundamental problems have not been fixed. These countries are suffering from unique problems that will raise their heads when the US Federal Reserve cuts its stimulus spending. Banks in emerging economies have increase their interest rates, which has decreased loans in their countries and exacerbated financial difficulties for the banks.
The possibility that the fed could change its monetary policy today and reduce the amount of money that it pumps into the global economy seemed to calm markets. At the same time, Draghi is expected to make some major moves next week. The Fed and the ECB acting simultaneously will increase the rate of growth in the West, but could cause a contagion for shaky emerging economies.
