Fed rate cut a positive backdrop for emerging markets says expert

The US Federal Reserve’s recent 25 basis point rate cut, while not indicative of a super dovish stance, provides a positive backdrop for emerging markets, according to Conrad Saldanha, MD & Portfolio Manager at Neuberger Berman. Speaking on the Fed’s policy, Saldanha stated that while Chairman Jerome Powell has opened the door for further easing, he is proceeding with caution.

Saldanha expressed the view that it might be premature to assume a prolonged cycle of rate cuts is underway. He highlighted potential inflationary pressures that have yet to materialise, stemming from tariffs. “You saw a PPI figure that was strong, and in certain areas, you could see 50 basis points a month, which could be 5-6% in terms of inflation,” he cautioned, referring to the Producer Price Index.

According to him, the full price impact of tariffs has not yet been felt due to prior inventory build-ups.
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Despite these concerns, Saldanha stated that the weakening of the US dollar following the Fed’s move is beneficial for emerging economies. He said that this trend “does give a positive backdrop to emerging markets and a lot more policy relief from an external source to countries such as India in their policy-making stance.”

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For the entire interview, watch the accompanying video

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