I will also address the risks that EMEs may face from the eventual normalization of monetary policy in the advanced economies. The heightened attention to advanced economies’ monetary policies and the potential spillovers to EMEs is understandable in light of the unprecedented policy steps taken in the aftermath of the global financial crisis.
The severity of the crisis and the challenge of a slow recovery required central banks in the advanced economies and elsewhere to take aggressive action in order to fulfill their mandates. In the United States, the Federal Reserve is bound by its dual mandate to pursue price stability and maximum employment.