On some previous occasions, such a large depreciation of the exchange rate had led to a rise in inflation expectations and a pick-up in inflation due to higher import prices, so requiring an increase in interest rates to contain and eventually reverse the inflation impulse.
The overall problem of the capital flows, both from the point of view of the monetary management of EMEs and reverse capital flows to industrialised countries, is now receiving worldwide attention. The Committee of Global Financial System (CGFS) under the aegis of BIS has also appointed a Working Group to look into these complex issues. BIS Review 86/2007  7  II.