A senior Reserve Bank official warned the global economy is facing a growing number of risks that may leave interest rates higher.
The global economy is now more at risk from major technological, political and environmental changes that will slow growth, put upward pressure on inflation and leave interest rates higher, a senior Reserve Bank official has warned.
The same banks have since rapidly lifted interest rates to deal with strong inflation that has coincided with very low unemployment in many countries. The Reserve Bank iswhen it meets next Tuesday. “The great moderation is behind us. The global economy now appears more vulnerable to stagflationary supply shocks, including from the rewiring of globalisation, geopolitical and political economy tensions, and energy shocks from climate change .“This contrasts with recent decades, where developments on the supply side of the economy were typically favourable for growth and inflation and so dampened financial market volatility.
Another issue was the way social media meant information could be passed among investors almost instantaneously, which meant runs on banks could happen overnight. Cyber risks were a major issue for all financial institutions, he said, arguing they now needed the “highest standards of management and governance”.
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