According to media sources, the World Bank has warned that interest rate increases by central banks throughout the world might lead to a worldwide recession in 2023.
According to the World Bank, central banks have increased rates “with a degree of synchronisation not seen over the last five decades” to combat rising prices, according to the BBC.
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Raising interest rates makes borrowing more expensive, slowing the rate of price increases. But it also raises the cost of borrowing, which can impede economic expansion.
Prior to the US Federal Reserve and Bank of England’s monetary policy meetings, which are anticipated to raise key interest rates next week, the World Bank issued its warning.
According to Thursday’s World Bank report, the world economy is experiencing its most severe slump since 1970, according to the BBC.
The three biggest economies in the world, the US, China, and the euro area, were stated to have been dramatically slowing down, according to a research.
According to the report, even a slight blow to the world economy over the course of the upcoming year might send it into a recession.
In order to “lower the degree of tightening needed,” the World Bank also urged central banks to coordinate their initiatives and “convey policy choices properly.”
The rate of price growth, or inflation, just reached a 40-year high in the US and the UK. Higher demand resulted from the easing of pandemic restrictions and the Ukraine War.
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In response, interest rates have been increased by central bank officials to reduce demand from consumers and companies. Large rate increases, however, raise the possibility of a recession since they can impede an economy, according to the BBC.