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The world could face a recession next year as central banks around the world tighten monetary policy at the same time World Bank Zeng said in a new report, calling for higher production and removing supply bottlenecks to ease inflation.
several indicators global recession There are already “flickering signs,” the report said. It added that the global economy is now in the midst of its worst slowdown after a post-recession recovery since 1970.
The central bank said global central banks could raise interest rates by as much as 4%, twice as much as in 2021, just to keep core inflation, which strips out volatile items such as food and fuel, at 5%.
Countries from the U.S. to Europe and India are aggressively raising lending rates in an effort to curb the supply of cheap money and thus help reduce inflation. But this monetary tightening comes at a cost. It stifles investment, lowers jobs and dampens growth, a trade-off faced by most countries, including India.
“Global growth is slowing sharply and is likely to slow further as more countries slip into recession. I am deeply concerned that these trends will continue, with devastating long-term consequences for people in emerging market and developing economies consequences,” World Bank President David Malpass said in a statement following the release of the report on Thursday.
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The world is facing record inflation as the war in Ukraine reduces food supplies, the pandemic’s knock-on effects on supply chains, weak demand from China’s ongoing coronavirus lockdown, and extreme weather output that has upended agricultural forecasts.
The Reserve Bank of India (RBI) announced that it will raise the repo rate by 50 basis points for the third time in August to 5.40%. A basis point is one percent. The RBI maintained its inflation forecast for 2022-23 at 6.7%, while forecasting real (inflation-adjusted) GDP growth of 7.2%.
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Retail inflation in India rose 7% in August, after rising 6.71% in July, official data showed. Consumer inflation remained above the central bank’s 4% (+/-2%) ceiling for the eighth consecutive month.
The latest World Bank report highlights that raising interest rates alone may not be enough to ease inflation caused by supply constraints, and countries should focus on boosting commodity supplies.
“Policy makers are likely to shift their focus from reducing consumption to increasing production,” Malpass said in the statement, underscoring a study by World Bank economists Justin-Damin Ghenette, M Ayhan Kose and Naotaka Recession fears in a report by Sugawara. Central banks should continue their efforts to curb inflation without triggering a global recession, the report said.
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