The world may be edging toward a global recession next year as central banks are raising interest rates to combat inflation, the World Bank warned.
“The currently expected trajectory of interest-rate increases and other policy actions may not be sufficient to bring global inflation back down to levels seen before the pandemic. Investors expect central banks to raise global monetary-policy rates to almost 4% through 2023,” the bank said in a recent study.
According to a bank’s recent study the three top economies (the U.S., China and the Eurozone) have been slowing sharply, so a moderate hit to the global economy could tip it into recession.
The bank stated that the global economy is facing its steepest slowdown after a post-recession recovery since 1970, as consumer confidence keeps dropping.
“Global growth is slowing sharply, with further slowing likely as more countries fall into recession,” the World Bank president, David Malpass said.
Malpass noted that policymakers should shift their focus from reducing consumption to boosting production, including efforts to generate additional investment and productivity gains.
The bank said that ongoing interest rate increases and related policies were likely to continue in the coming months, but those may not fall short to bring inflation back down to levels seen before the Covid-19 pandemic.