Inflation Paranoia Threatens Recovery

By Anis Chowdhury and Jomo Kwame SundaramSYDNEY and KUALA LUMPUR, Feb 1 2022 (IPS) Inflation hawks are winning the day. The latest ‘beggar thyself’ race to raise interest rates has begun. This ostensibly responds to the spectre of runaway inflation, supposedly retarding economic growth and progress, and thus threatening central bank ‘credibility’. Anis ChowdhuryInflation fetish The ‘one size fits all’ policy of raising interest rates to contain inflation is being touted again, the world over. This will surely kill national efforts to revive economies reeling from COVID-19 pandemic slowdowns. Central banks in many emerging market and developing economies (EMDEs) – such as Brazil, Russia and Mexico – began raising policy interest rates right after inflation warning bells were set off after mid-2021. Indonesia and South Africa have since joined the bandwagon. International Monetary Fund (IMF) Managing Director Kristalina Georgieva has warned that US interest rate rises would “throw cold water” on global recovery, especially hurting struggling emerging markets. An earlier IMF blog had urged EMDEs to prepare for earlier than expected US interest rate hikes. The Fund has lowered its growth projections as the inflation bogey induces monetary and fiscal tightening. Inflation paranoia Inflation hawks denounce price increases, claiming – without evidence – that it impedes growth. Former World Bank chief economist Michael Bruno and William Easterly refuted the...
Source: IPS Inter Press Service - Health - Category: International Medicine & Public Health Authors: Tags: Climate Change COVID-19 Development & Aid Economy & Trade Energy Financial Crisis Global Headlines TerraViva United Nations Trade & Investment IPS UN Bureau Jomo Kwame Sundaram & Anis Chowdhury Source Type: news