Oil price declines to dampen Emerging Markets inflation pressures further

The fall in oil prices also looks durable and is likely to dampen reflation pressures in EM. The Iran deal opens the door to an additional 300-500 kbd of supply in 6-12 months into an already oversupplied oil market. 

"A response is not expected from OPEC, so lower oil prices will likely be adjusted to through lower non-OPEC supply and higher demand. Both of these are likely to take some time, however", says Barclays.

Finally, features of the current global growth cycle will also keep monetary policy dovish, especially in EMs. The current cycle is notable in that it is a service-sectordriven recovery rather than a manufacturing-led one. This disproportionately affects EMs, which tend to have higher concentration of manufacturing (East Asia, CEE) and are commodity-producing (LatAm, IDR, ZAR). 

"This suggests that the tightening of monetary policy is likely to be slow (eg, MXN, ZAR) and that policymakers will be tolerant of weaker currencies (eg, East Asia) even as global growth prospects improve into year-end", added Barclays.