U.N. Calls On Fed, Other Central Banks to Halt Interest-Rate Increases. What’s next? A call for more QE?

The Federal Reserve and other central banks risk pushing the global economy into recession followed by prolonged stagnation if they keep raising interest rates, a United Nations agency said Monday.

The warning comes amid growing unease about the haste with which the Fed and its counterparts are raising borrowing costs to contain surging inflation. India’s central bank Friday said that the global economy was facing a third major shock after the Covid-19 pandemic and Russia’s invasion of Ukraine, in the form of aggressive rate increases by central banks in rich countries.

In its annual report on the global economic outlook, the United Nations Conference on Trade and Development said the Fed risks causing significant harm to developing countries if it persists with rapid rate rises. The agency estimated that a percentage point rise in the Fed’s key interest rate lowers economic output in other rich countries by 0.5%, and economic output in poor countries by 0.8% over the subsequent three years.

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UNCTAD estimated that the Fed’s rate increases so far this year would reduce poor countries’ economic output by $360 billion over three years, and further policy tightening would do additional harm.

www.wsj.com/articles/u-n-calls-on-fed-other-central-banks-to-halt-interest-rate-increases-11664809202

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