As I noted earlier, heightened uncertainty and instability in financial markets raise spreads and nonprice terms in credit markets in ways that are unpredictable, and with consequences that are uncertain. This puts weight on monetary policy to take aggressive actions – including the potential use of unconventional instruments – to offset these consequences.
Thirdly, there has been weakening of global sentiment towards emerging markets with the currencies of these markets coming under persistent depreciation. Finally, recently, the dollar has strengthened against the major currencies as a result of expectations that America will be the first among the industrialized countries to raise interest rates.