Advanced economies must alter their monetary policies because continued monetary tightening could worsen economic conditions, according to a new report.
The United Nations Conference on Trade and Development (UNCTAD) stated in its most recent review that the coronavirus pandemic, as well as the debt crisis, inflation, climate change, and the war in Ukraine, all contributed to the global slowdown.
“Even as advanced economies’ growth slows more sharply than expected, policymakers’ attention is shifting to easing inflationary pressures through restrictive monetary policies, in the hope that central banks can steer the economy toward an easy landing and avoid a full-fledged recession.”
According to the study, any belief that central banks can lower rates by relying on higher interest rates without causing a recession is an “unwise bet.”
This year’s interest rate hikes in the United States are set to cut an estimated $360 billion of future income for developing countries (excluding China) and signal even more trouble ahead, the report warns.
“There’s still time to step back from the edge of recession,” said Rebeca Grynspan, the secretary-general of UNCTAD. “We have the tools to calm inflation and support all vulnerable groups. This is a matter of policy choices and political will. But the current course of action is hurting the most vulnerable, especially in developing countries, and risks tipping the world into a global recession.”
