To the extent that it depends on the lucidity of the social partners as well as on the “role model” played in a number of countries by governments and local authorities in handling wages in the civil service, reducing the degree of loss of relative unit labour cost competitiveness in good times would smoothe the necessary biting of the market adjustment competitiveness channel in more difficult periods of times.
  On the other hand, as markets expect interest normalization, this could lead to global portfolio rebalancing. Should this happen, a weakening of capital flows to or even a pull-out of capital from emerging markets could ensue.