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Overzealous rate hikes could send global economy into ‘devastating’ recession, World Bank warns central banks
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Central banks could plunge the world economy into a ‘devastating’ recession if they raise interest rates too high, the World Bank warns.
As the Bank of England, the European Central Bank and the US Federal Reserve continued with unprecedented rate hikes, the Washington DC-based organization sounded cautious.
The day before, the International Monetary Fund (IMF), the World Bank’s sister organization, urged central banks to be “stubborn” in the fight against inflation.
Walks: As the Bank of England (pictured), European Central Bank and US Federal Reserve push through rate hikes, the Washington DC-based World Bank sounded a warning
The mixed messages, showing how divided experts are in their approach to tackling red-hot inflation, may have left policymakers scratching their heads.
The Fed has embarked on an aggressive fight against inflation, raising interest rates at its two most recent monetary policy meetings by an abnormally high 0.75 percentage point to a range between 2.25 and 2.5 percent.
The higher interest rates in the US, the more the dollar rises. This then makes inflation worse in other countries that have to pay more to import everything sold in dollars.
The Bank of England is set to raise rates again next week and is widely expected to announce its own unprecedented 0.75 percentage point hike, pushing interest rates to 2.5 percent.