US Federal Reserve Cuts Stimulus Support
One of the pivotal events last week was the decision by the US Federal Reserve to continue trimming its massive stimulus support despite a major pullback in the creation of jobs within the USA during December. The central bank proceeded, as expected, by slicing a further $10 billion per month from its influential asset purchasing program. This verdict had a profound negative bearing on the emerging market crisis as the Fed’s monetary easing efforts over the last few years has been the prime reason for cash being pumped into these developing economies.
Consequently, as the Fed’s latest tapering action obstructed this process, it severely exaggerated last week’s problems. The ensuing impact was witnessed last Friday as the emerging markets were subjected to a fresh bout of intensive pressure causing their stocks to nose-dive. The troubles extended on that day to include not just Turkey, Ukraine, Argentina and South Africa but also Russia and Poland. Although leading members of the US Federal Reserve acknowledged the potential impacts of their stimulus tapering decisions on these vulnerable markets, they stated that these nations must now take actions to place their own affairs in order.
Eurozone CPI Misses Analysts Targets
The Eurozone was not without its problems as well. The region published an economic indicator last Friday disclosing that its consumer price inflation had slumped during January by missing analysts’ expectations. This result could now have serious implications on the next meeting of the European Central Committee (ECB), which is scheduled to convene this coming week. This is because the posted value of 0.7% is at the same level when the ECB caught investors off-guard by instigating a surprise interest rate cut last November. With unemployment in the region also registering record highs, growing conjecture about the ECB’s next move placed the euro under considerable pressure last Friday.