Overzealous rate hikes could tip the global economy into a ‘devastating’ recession, World Bank warns central banks

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The World Bank has warned that central banks could push the global economy into a “devastating” recession if they raise interest rates too high.

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As the Bank of England, the European Central Bank and the US Federal Reserve continue their unprecedented rate hikes, the Washington, DC-based organization has expressed caution.

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A day earlier, the International Monetary Fund (IMF), a subsidiary of the World Bank, urged central banks to be “stubborn” in fighting inflation.

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Climbing: As the Bank of England (pictured), the European Central Bank and the US Federal Reserve move ahead with rate hikes, the World Bank in Washington, DC sounded cautious.

Mixed reports showing how divided experts are in their approach to fighting red-hot inflation may have left policymakers scratching their heads.

The Fed has launched an aggressive fight against inflation by raising rates by an abnormally large 0.75 percentage points in both of its most recent monetary policy meetings to a range of 2.25% to 2.5%.

The higher the rates in the US, the more the dollar appreciates. This exacerbates inflation in other countries, which have to pay more to import everything that is sold in dollars.

The Bank of England is due to raise rates again next week and is expected to announce its own unprecedented 0.75 percentage point hike, raising rates to 2.5%.

Credit: www.dailymail.co.uk /

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