The World Bank Group yesterday cautioned the Central Bank of Nigeria (CBN), and other central banks across the world on the contingency of global economic recession, subsequent to simultaneous increase in interest rates.
The CBN had at the last Monetary Policy Committee (MPC) meeting in July in Abuja increased the benchmark interest rate from 13.5 percent to 14 percent.
In a report tilted: Risk of Global Recession in 2023 Rises Amid Simultaneous Rate Hikes, World Bank Group President David Malpass, stated that central banks’ simultaneous hike of interest rates in reaction to inflation, will push the world economies toward a global recession in 2023.
The move would also lead to a string of financial problems in emerging markets and developing economies that would do them lasting harm, according to a comprehensive new study by the World Bank.
The study depends on views from previous global recessions to analyze the recent evolution of economic activity and presents scenarios for 2022 to 24.
The report stated that central banks around the world have been increasing interest rates this year with a degree of synchronicity not seen over the past five decades-a trend that is most likely to continue till next year.
“Yet 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 four percent through 2023-an increase of more than two percentage points over their 2021 average,” it said.
Unless supply disruptions and labor-market pressures subside, those interest-rate increases could leave the global core inflation rate (excluding energy) at about five per cent in 2023-nearly double the five-year average before the pandemic, the study reveals.