Markets will remain focused on vulnerabilities they may have missed prior to the taper tantrum, New York Fed President William Dudley said in a speech in Paris. He said the greater premium on strong fundamentals, policy coherence and predictability will likely remain, and the adjustment may be difficult, as evidenced by last month's volatility. He said emerging markets are better equipped to handle the Fed's prospective exit because of the absence of pegged exchange-rate regimes, improved debt service ratios, larger foreign exchange reserve liquidity cushions, clearer and more coherent monetary policy frameworks, generally improved fiscal discipline and better capitalized banking systems. He said if all goes according to forecast, the Fed will likely begin to raise its federal funds target "sometime next year."
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