London, (Business News Report)|| The International Monetary Fund expected that the trends of central banks around the world to tighten interest rates at a rapid pace in the stock and bond markets around the world.
The IMF said that central banks, which are moving faster than expected to stem the incursion of inflation, will harm the stock and bond markets.
Tobias Adrian, director of the Monetary and Financial Markets Department at the International Monetary Fund and former senior vice president of the Federal Reserve of New York, said that the chances of a massive selling wave in the major financial markets will increase if monetary tightening in major countries is accompanied by a stagnation of the economy.
The IMF had lowered its forecast for the growth of the global economy and many of the major economies in the world this year, against the backdrop of the repercussions of the Russian war against Ukraine and the Corona virus pandemic.
Central banks may need to tighten monetary policy faster than expected, which could lead to a sudden downturn” in financial markets, Adrian said.
In a related context, the Fund warned that the global economy will be significantly affected by the high indebtedness of individual companies, which threatens its recovery.
He said that governments around the world took exceptional measures to support their economies with the outbreak of the virus two years ago, including suspending debt repayments or providing large-scale loans.
The Fund explained that the exceptional programs have led to high levels of indebtedness, which is detrimental to the prospects for the global economy.
He said the debt burden could hamper growth in developed countries by 0.9 percent, and in emerging markets by 1.3 percent, over the next three years.
“Families that suffer from financial pressures and fragile companies, which have increased in number and proportion during the Corona pandemic, will likely reduce their spending, especially in countries that suffer from ineffectiveness in measures to cope with bankruptcy and the limited margins of maneuvering in the budget,” he said.
To avoid exacerbating problems, the Fund called on governments to set the pace of phasing out aid and spending programs.