Call from the United Nations to the USA and the World: “Do Not Raise Interest Rates!”

If the US Federal Reserve and other central banks continue to raise interest rates, they risk pushing the global economy into recession and then prolonged recession, a United Nations agency said on Monday.

The warning came amid growing discomfort at the urgency of the US and other central banks to raise borrowing costs to contain rising inflation.

The central bank of India said on Friday that the global economy is facing a third major shock in the form of aggressive rate hikes by central banks in rich countries, following the Covid-19 outbreak and Russia’s invasion of Ukraine.

“Developing Countries Will Suffer Greatly If Interest Rate Increases Continue”

In its annual report on the global economic outlook, the United Nations Conference on Trade and Development (UNCTAD) stated that if the FED continues to increase interest rates, it risks causing significant harm to developing countries.

The agency estimates that a one-point increase in the Fed’s core interest rate reduced economic output in other rich countries by 0.5% and in poor countries by 0.8% over the next three years.

UNCTAD estimates that the US FED’s rate hikes so far this year will reduce poor countries’ economic output by $360 billion over three years, and further policy tightening will do additional harm.

US Fed Chairman Jerome Powell Responds to UN Call

UNCTAD Secretary General, Rebeca Grynspan, said:

“There is still time to come back from the brink of recession. We have the tools to calm inflation and support all vulnerable groups. However, the current trend is hurting the most vulnerable, especially in developing countries, and risks pushing the world into a global recession.”

In a press conference on the subject, Fed Chairman Jerome Powell said that the central bank takes into account the impact of its policies on the rest of the world, but will continue to raise interest rates to control inflation:

“We are very aware of what is going on in other economies around the world and what this means for us and vice versa. We always take all of this into account in the estimates that our staff put together or that we prepare on our own.”

UNCTAD said politicians should focus on measures that directly target price increases, including price caps financed by one-off taxes on the extraordinary profits many energy companies make, rather than price increases to alleviate energy and food shortages.

“After Grain In Ukraine Passed Through The Black Sea, There Was A Discount On Grain Products”

UNCTAD noted that the agreement signed in July between Russia and Ukraine, allowing the export of more than one million tons of grain held in Ukrainian silos via the Black Sea, helped reduce world grain prices by 1.4%.

The UN agency cut its global economic growth forecast for 2022 to 2.5% from 2.6% in March and said it expects growth to slow to 2.2% in 2023.

US interest rate hikes bitcoin and other cryptocurrencies also negatively affected.

*Not investment advice.

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