It's getting a little tight around the neck for emerging market central bankers.
On the same day that the governor of Malaysia's central bank quit, and just days after Urjit Patel, governor of the Reserve Bank of India, took the unprecedented step of writing an oped to the Federal Reserve, begging the US central bank to step tightening monetary conditions, and shrinking its balance sheet, thereby creating a global dollar shortage which has slammed emerging markets (and forced India into an unexpected rate hike overnight), Indonesia’s new central bank chief joined his Indian counterpart in calling on the Federal Reserve to be "more mindful" of the global repercussions of policy tightening amid the ongoing rout in emerging markets.
As Bloomberg reports, in his first interview with international media since he took office two weeks ago, Bank Indonesia Governor Perry Warjiyo - who bears a remarkable resemblance to what Jamie Dimon would look like if he were about 40 pounds overweight - echoed what Patel said just days earlier, namely that the pace of the Fed’s balance sheet reduction was a key issue for central bankers across emerging markets.Bank Indonesia Governor Perry Warjiyo
As a reminder, the RBI Governor made exactly thew same comments earlier this week, arguing that slowing the pace of stimulus withdrawal at a time when the US Treasury is doubling down on debt issuance, would support global growth, as the alternative would be an emerging markets crisis that would spill over into developed markets.
In a thinly veiled warning addressing the Fed, Warjiyo said that "we know every country must decide their policy based on domestic circumstances but look, you have to take account of your actions and the impact of your actions to other countries, especially the emerging markets."
Actually, no it doesn't: the only thing the Fed has to take into account is what its private owners (see "Bernanke's Former Advisor: "People Would Be Stunned To Know The Extent To Which The Fed Is Privately Owned") ask and proceed accordingly.
The growing complaints from EM central bankers come at a time when the Fed continues to tighten monetary policy, and with another interest-rate hike expected next week, emerging markets across the globe are bracing for a further selloff. Bank Indonesia has already raised its key rate twice to help bolster its currency, while the Reserve Bank of India on Wednesday became the latest to move, increasing its policy rate by 25 basis points to 6.25%, surprising a majority of analysts who expected no change.
“Communication is very important,” Warjiyo said. “We are looking for the Fed to communicate more clearly the intention of their policy so the market can understand clearly and also react and all the central banks can also anticipate and consider it in their policy making.”
Actually, here the Fed has been especially clear, often more so...