The oil price surge driven by the war in Iran will prevent central banks in developing nations from quickly lowering borrowing costs and put their long fight to tame inflation to the test, economists warn.
Before US and Israeli strikes on Iran, central banks in many emerging markets had been primed to stimulate growth by cutting interest rates after a lengthy battle to defeat high inflation.
Some countries, especially in eastern Europe, had already started reducing rates. But others such as South Africa and Brazil, where the benchmark Selic rate is at its highest point in nearly two decades, at 15 per cent, had barely begun. Turkey’s interest rates are still at 37 per cent despite starting to cut them in late 2024.
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