Inflation, Fed policy and emerging markets: the good, the bad and the ugly

Financial markets are fixated on prospects for US inflation and Federal Reserve policy, and appropriately so. Rising interest rates may exacerbate already-elevated debt burdens and put pressure on business and government finances around the world. If higher rates are driven mainly by prospects for a brisk economic recovery, rising debt-service payments should be offset by higher profits and tax revenues. But if rising interest rates reflect prospects for sustained higher inflation, the damage