THE Federal Reserve has said it is ready to start raising rates and withdrawing liquidity. Rates remain near zero for now, but when the tightening begins, we expect it to be swift.

The Fed will likely raise rates 8 times over the next 2 years and reduce their bond holdings by US$1.5 trillion by the end of next year.

Emerging market investors often recall the taper tantrum of 2013, when they learnt that the Fed was putting the brakes on its easing. This led to a surge in US treasury yields, and an exodus of capital from emerging markets.