Allianz Research • China: Monetary policy will remain selectively • Emerging markets: Most central banks will need accommodative over the coming year to support to keep raising interest rates in light of persistently the economy, contain any systemic risk from the real higher energy and food prices and strong down- estate sector and facilitate continued fiscal policy ward FX pressures. However, only a few have easing. We expect just two more policy rate cuts reached positive real interest rates so far (e.g. Bra- in 2023 (before a stabilization in 2024), meaning zil, Mexico, Saudi Arabia, Vietnam). Nonetheless, that this round of monetary easing will have been some central banks, mainly in Central and Eastern more dragged out and less intense than in the past Europe (CEE), are likely to be the first to cut rates (-40bps over two years vs. -50bps in less than three again in mid-2023 to support the economy in the quarters in late-2019/early-2020). Chinese policy- wake of the sharp global growth slowdown, follo- makers are wary of structural vulnerabilities (overall wed by other regions in Q4 2023. The largest ones indebtedness, risk of overcapacity) and potential will be in Latin America (between 200 to 300bps in inflationary pressures coming from the post-Covid Brazil, Colombia and Chile) and smaller ones (50 reopening. The monetary stance is likely to switch to 100bps) in the Middle East and very few Afri- to neutral and restrictive in H2 2024, when the can and Asian countries. Overall, we expect key post-Covid domestic recovery becomes sustainable. interest rates to remain above 2021 levels by the end of 2024. Figure 6: Eurozone and US: current and past policy rate-hiking cycles (%) United States Eurozone 8 3 6 2 4 2 1 0 0 1M 6M 11M 16M 21M 26M 31M 36M 1M 6M 11M 16M 21M 26M 31M 73-74 79-80 80 99-00 05-08 2011 94-95 99-00 04-06 15-18 22 22-24 (f) 2022 22-24 (f) Sources: Refinitiv Datastream, Allianz Research 12