'Central bankers are supposed to be looking out for the economy as a whole,' wrote one observer. 'But at the end of the day, they have the mentality of bankers, protecting creditors.'
"Central bankers are supposed to be looking out for the economy as a whole," wrote one observer."But at the end of the day, they have the mentality of bankers, protecting creditors."Synchronous interest rate hikes imposed by the world's most powerful central banks in recent months have triggered mounting concerns of a global recession that could plunge millions more into poverty, spark a surge in joblessness, and heighten economic pain for poor nations in particular.
late last week warning that central banks' efforts to tame inflation by aggressively hiking interest rates—thereby increasing borrowing costs and tamping down demand—could cause a significant global economic contraction without bringing inflation back down to the pre-pandemic average. "A dangerous contagion is spreading from the U.S. Federal Reserve to the European Central Bank and the rest of the world." Under a scenario of persistently high inflation, the World Bank notes, the U.S. Federal Reserve, the European Central Bank, the, and other central banks would likely continue raising interest rates, further slowing a global economy that is already"in its steepest slowdown following a post-recession recovery since 1970." "If the degree of global monetary policy tightening currently anticipated by markets is not enough to lower inflation to targets, experience from past global recessions suggests that the requisite additional tightening could give rise to significant financial stress and trigger a global recession in 2023," the study cautions."This would entail a recession in advanced economies within the range of the contractions that occurred in the past five global recessions." "A global recession would also translate into a sharp decline in growth in [emerging market and developing economies]," the study adds."In light of elevated vulnerabilities in many of these economies, they would face severe challenges associated with financial stress."in a statement that"global growth is slowing sharply, with further slowing likely as more countries fall into recession." "My deep concern is that these trends will persist, with long-lasting consequences that are devastating for people in emerging market and developing economies," said Malpass."To achieve low inflation rates, currency stability, and faster growth, policymakers could shift their focus from reducing consumption to boosting production. Policies should seek to generate additional investment and improve productivity and capital allocation, which are critical for growth and poverty reduction." The World Bank's warning came just days ahead of the U.S. Federal Reserve's latest policy meeting this week, when it is expected to announce its third 75-basis-point interest rate hike of the year following worse-than-expectedProgressive
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