World Economy

Global Recession Incoming?

Global Recession Incoming?

In a world still suffering from the consequences of a devastating virus while watching a modern geopolitical conflict take shape.

Investors throughout the world are evaluating these events’ long-term effects.

Experts have expressed concern that a global recession is imminent due to a combination of the factors above, particularly rising prices and the breakdown of supply networks.

According to the IMF’s chief, the prognosis for the world economy has “darkened markedly” recently, and there is a growing likelihood that a recession will occur in the next 12 months.

According to the Federal Reserve’s “beige book” survey, released on Wednesday, while the U.S. economy is still expanding, there have been noticeable indicators of a slowdown over the past month, and recession fears have increased.

The report stated that while “economic activity expanded at a modest pace, on balance, since mid-May,” “contacts in five Districts indicated concerns over an increased likelihood of a recession,” and “several Districts reported developing indicators of a slowdown in demand.”

According to its analysis of the state of the national economy, “similar to the previous report, the outlook for future economic growth was primarily negative among reporting Districts, with contacts highlighting expectations for further weakening of demand over the next six to twelve months.”

The announcement coincides with the government’s announcement that consumer prices increased at their greatest annual rate since late 1981 in June, rising by 9.1%.

Energy and food prices were the main factors in the increase, but housing expenses also played a significant role.

The Fed is faced with this predicament as it considers another significant increase in interest rates later this month to follow the 75 basis point hike in June. This slowing economy is also under intense price pressure.

According to economists and investors, the U.S. Federal Reserve could raise interest rates by a record 1% when its board meets in a week.

It would be inaccurate to believe that a rate hike of less than 75 basis points is likely when the Fed meets in July.

The question is how high the Fed will have to raise rates to bring down inflation.

The figures released on Wednesday refuted some analysts’ claims that the inflation rate peaked in May.

The Reserve Bank of New Zealand and the Bank of Korea both lifted their benchmark rates this week, while the Bank of Canada stunned the markets on Wednesday by lifting its base rate by a full percentage point.

This increases pressure on other central banks to follow suit to contain inflation and another projected step higher by the Fed.

Pressure is mounting on the European Central Bank to increase interest rates to fight inflation and save the euro, which this week fell to parity with the U.S. dollar for the first time in 20 years.

However, raising interest rates is a high-risk move for many nations given the growing concern in the U.K.; for instance, the Bank of England’s aggressive rate increases may send the nation into recession.

Sources Used: The Guardian & USNews

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