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Inflation, central banks actions fuel recession risks

Inflation

London, (Business News Report)|| It seems that the risks of recession have begun to increase in the global economy, fueled by the high rates of inflation and the moves of the major central banks to curb this rise.

Central banks around the world are scrambling to stem rising inflation, fears exacerbated by the impact of strict coronavirus lockdowns in China and the war in Ukraine.

Last week, the United States and Britain recorded the highest inflation rate since the early 1980s.

The central banks of Canada and New Zealand set an example for the US Federal Reserve and others by raising interest rates by 50 basis points for the first time in 22 years.

Bank of America said the growth outlook by fund managers is the most pessimistic ever, and JPMorgan Chase has ramped up its reserves to protect itself from any economic downturn.

Meanwhile, crises in Sri Lanka and Pakistan have deepened, and the United Nations has warned of a “perfect storm” sweeping developing countries as commodity prices soar. The World Trade Organization also lowered its forecast for trade, and the number of searches for the word “recession” on “Google” and the “Bloomberg” platform for professional services increased.

Against this backdrop, policymakers head to Washington this week for IMF and World Bank meetings.

The fund already says that the war means that it will cut its forecast for 143 economies this year. That is 86% of global GDP.

“we are facing a crisis on top of a crisis,” said Kristalina Georgieva, managing director of the International Monetary Fund.

But there are also reasons to believe that resilience may be the trend today, at least in rich countries.

Thanks to catalysts (both fiscal and monetary) in the era of the pandemic, households in developed markets still have 11% to 14% of their income in savings, according to an analysis sent to clients last week by JPMorgan Chase.

Leverage rates are at their lowest levels in several decades and income is advancing at an annual rate of about 7% amid a decline in the labor supply, which are catalysts for a possible recovery in the second half of the year, and in the United States, last week’s reports on retail sales and consumer confidence raised hopes that it will not decline. All consumers spend despite price shocks.

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