Fed chairman Jerome Powell gives EM peers strong reason to cut rates

His signal on Wednesday that the Fed is preparing to lower borrowing costs will allow monetary authorities in developing markets to ease policy without triggering an exodus of capital

Federal Reserve Chairman Jerome Powell gave emerging-market central banks another solid reason to lower interest rates.

His signal on Wednesday that the Fed is preparing to lower borrowing costs for the first time in a decade is supportive of higher-yielding currencies, which in turn allows monetary authorities in developing markets to ease policy without triggering an exodus of capital.

That’s an opportunity for policy makers to bolster their economies against slowing growth, subdued inflation and simmering trade tensions that are hurting investment and manufacturing. Across Asia and Europe, factory activity shrank in June while the US showed only meager economic expansion.

Central banks