"A resurgence of heightened cross-border capital flow volatility in response to the Fed's tightening could have negative spillovers for those with large external funding needs, high leverage, macroeconomic imbalances, or uncertainties around politics and policies," it said.
The interest rate hike reflects a strengthening
"While the impact of the rate increase on the
Moody's expects the Fed to tighten rates at a very gradual pace, with two to three more increases pushing the fed funds rate to around 1.25 per cent to 1.5 per cent by the end of 2017.
"The impact of a higher fed funds rate will likely be more noticeable in some emerging market economies than in the
While emerging market economies could benefit from a strengthening
"The most direct impact will be felt in those economies that have high external financing needs relative to their foreign exchange earnings and reserves," it said. Moody's also said that the spillover effect may manifest itself in different ways. For instance, in some cases, a pronounced currency depreciation could lead to higher inflation, which along with the threat of sustained capital outflows, could force central banks to raise interest rates.
With economic growth picking up since the middle of the year, the