Investors wary as other central banks follow US Federal Reserve in raising borrowing costs
Photograph: Arnd Wiegmann/ReutersPhotograph: Arnd Wiegmann/ReutersThe global rout in stock markets, cryptocurrencies and other risky assets has gathered pace amid growing concern that out-of-control inflation, rising interest rates and slowing growth could combine to tip the world into recession.
Despite the Bank of Japan announcing on Friday that it was sticking to its ultra-loose monetary policy, he added the rate rises eleswhere were a “highly ominous signal for stock market investors... the global race to hike rates is nowhere near the finishing line”.Many believe that the United States may be in recession by next year, raising the prospect of a wider global slump.
“The speed and degree of policy tightening may prove too much for economies to handle, particularly given the commodity price shock currently in play,” economists at NAB bank in Australia said in a note on Friday. “As a result, recession risk for several of the major advanced economies, including the US, is uncomfortably high.”
The ongoing coronavirus lockdowns in China are causing further problems for the global economy. Supply chain snarl-ups in the world’s second largest economy that started during the pandemic are predicted to continue into next year at least thanks to the shutdown of Shanghai and other key regions.