On December 16, the US Federal Reserve raised the federal funds rate from a target range of 0-0.25 percent to 0.25-0.5 percent. Although the rates hike - which is both very small and reflective of an overall accommodative monetary policy stance - is unlikely to have large direct effects on the US economy, the impact to financial markets and indirect impact on emerging market economies could be meaningful for multinational companies. The Federal Reserve was intentionally ambiguous in its guidance for the pace and size of subsequent interest rate increases, the uncertainty around which is likely to bring substantial financial markets volatility in 2016.

FSG has long held the view that an interest rates increase from the Federal Reserve, likely in Q4, would usher in another challenging year for business in emerging markets. We encourage you to review our blog post from September, which outlines the direct impacts of a rates hike and their results for emerging markets business.

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