If higher inflation leads the US Fed to raise rates soon, emerging markets will face problems

Economic recovery, like Covid-19 vaccines, will not be evenly distributed around the world over the coming two years. Despite enormous policy support provided by governments and central banks, the economic risks remain profound, and not only to frontier economies facing imminent debt problems and low-income countries experiencing an alarming rise in poverty. With the coronavirus far from tamed, populism rife, global debt at record levels, and policy normalisation likely to be uneven, the situation remains precarious.

This is not to deny the overall good news of the past 12 months. Effective vaccines have become available in record time, far sooner than most experts originally anticipated. The massive monetary and fiscal response has built a bridge toward a much-hoped-for end to the pandemic. And the public has gotten better at living with the virus, with or without the help of national authorities.

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