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The United Nations is in Washington D.C. urging the Federal Reserve and other rich-country central banks to stop raising interest rates or risk a global recession that will hurt developing countries. File photo by Alexis C. Glenn/UPI | License photo
October 3 (UPI) – The United Nations has accused the U.S. and other wealthy nations of raising interest rates to slow soaring inflation, which could lead to a global recession that is “worse than the 2008 financial and economic crisis.” Coronavirus disease Shock in 2020. “
trade and development reports, Posted on Monday The United Nations Conference on Trade and Development warned that “unless we rapidly change the current monetary and fiscal tightening policies in advanced economies, the world is heading for a global recession and secular stagnation.”
In the report, UNCTD requires US Federal Reserve And other central banks stopped raising interest rates, saying they stifled growth and hit developing countries hardest.
“U.S. rate hikes this year will reduce future incomes in developing countries excluding China by about $360 billion and portend more trouble ahead,” the report said.
Last month, the Fed raised the base rate Its latest move to combat the highest inflation in 40 years raised another 0.75 percentage point, pushing the federal funds rate to 3.25%, which had remained near zero in March.
Chairman of the Federal Reserve Jerome Powell Said the central bank takes into account the impact of its policy on the rest of the world, but expects more rate hikes in the future to control inflation.
Every percentage point increase in the Fed’s key interest rate reduces economic output in rich countries by 0.5%. The report estimated that the same rate hike would hurt poorer countries more by reducing economic output by 0.8%.
In addition to US interest rate hikes to fight inflation, the Bank of England has raised interest rates to 2.25%, the highest level since 2008, and is expected to reach as high as 6%.
“Any belief that they can push prices down without triggering a recession by relying on higher interest rates is a rash gamble,” the report said.
“The real problem for policymakers is not an inflation crisis caused by too much money chasing too few goods, but a distribution crisis, with too many companies paying too high dividends and too many people struggling between paychecks Struggling, too many governments survive on bonds, says Richard Kozul-Wright, Director of UNCTAD’s Globalization and Development Strategy Division in a statement.
In addition to rapid rate hikes and fiscal tightening in advanced economies, the report blamed the crisis on the COVID-19 pandemic and the war in Ukraine.
Some countries, including Zambia and Sri Lanka, were already showing signs of debt distress ahead of the pandemic in which climate change threatened Pakistan’s economic stability, the report said.
Political leaders in advanced economies are relying on the aggressive policies of the 1970s and 1980s to suppress inflation, UNCTD said, which the report said was not appropriate for the current state of the world.
“There is still time to step back from the brink of recession,” UNCTAD Secretary-General Rebecca Greenspan said in a statement. “We have the tools to quell inflation and support all vulnerable groups. It is policy choice and political will. problems. But the current course of action is hurting the most vulnerable, especially in developing countries, and risks tipping the world into a global recession.”
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