OPINION: Central banks are now moving in lockstep to hike rates to tame inflation, but their synchronised tightening risks plunging the global economy into a deep recession.
There’s no doubt they’re under enormous pressure to lift interest rates aggressively toand to convince businesses and households that these rapid price rises won’t continue.
There’s no doubt that this simultaneous monetary tightening will cause global demand to soften, and this in turn will reduce global inflationary pressures.The United States, for instance, is a major part of the global economy, so any reduction in US demand will cause inflationary pressures worldwide to ease. And that should make it easier for other central banks to bring inflation under control.
“The resulting synchronised monetary tightening across countries is historically unprecedented, and its effects are expected to bite, with global growth slowing next year and inflation decelerating,” he noted.
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