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The global economy is facing the “double worry” of inflation and recession

A recent policy study by the Center for Economic Policy Research shows that the world economy can avoid the hyperinflation scenario, but the price may be global economic growth. weaker, even recession. Central banks are faced with a choice that may again have to offer much stronger policy responses than anticipated.

Global inflation has increased over the past year from below 2-6%, the highest since 2008. Inflation is now well above central bank targets in most advanced economies and markets. emerging. According to the International Monetary Fund’s (IMF) communications director, the conflict in Ukraine is expected to further increase inflation risks this year.

“The Russia-Ukraine conflict has caused supply disruptions, especially for food and energy, leading to an increase in the cost of living, especially for low-income households. And if there are signs that inflation will be high in the medium term, I think central banks may be forced to react faster than anticipated by raising interest rates. Disruptions in watershed sectors will have an impact beyond bilateral trading partnerships,” said the International Monetary Fund’s communications director.

The Russian Federal Statistical Service recently learned that the inflation rate in the country reached 16.7% in March compared with the same period last year, the highest level since 2015, while food prices even stronger increase.

In the US, the world’s top developed economy, the administration of President Joe Biden is also facing growing concerns about the risk that inflation could spark a recession. The country’s inflation was 7.9% in February, the highest in 40 years.

The only hope right now is that the US Federal Reserve (Fed) can figure out how to raise interest rates and soften business investment, as well as consumer spending. However, according to GS. Robert Pollin at the University of Massachusetts, this will not be easy.

“The problem is that what we have right now is a combination of wage increases driving prices up, alongside supply chain issues due to Covid-19 and oil-related issues. And the Bureau. The Federal Reserve, too, won’t be able to solve all of this.” – Prof. Robert Pollin commented.

In Europe, the European Union countries are also thinking about changing their spending and national recovery plans less than a year after being adopted due to the impact of both conflict and inflation. Eurostat annual inflation rose to a record 7.5% in March, the highest since 1997, according to preliminary estimates by the European Statistics Agency (Eurostat). Consumers in Europe are also increasingly feeling the effects of inflation.

Although Asia is not yet in crisis, some economists do not rule out increasing inflationary pressures. The uncertain progress of the post-pandemic recovery, coupled with the Russia-Ukraine conflict, have raised concerns about long-term food supplies and future prices.

According to credit rating agency Moody’s, central banks such as the US Federal Reserve have learned from the prolonged inflation of the 1970s enough that the “dark scenario” does not happen once. again. However, central banks will likely choose to push the economy into a recession rather than inflation accompanied by a recession and then a much worse recession.


According to Thu Hoai

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