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U.N. agency warns of recession linked to 'imprudent' monetary policy

Economy Oct 03, 2022 03:17PM ET
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© Reuters. FILE PHOTO: The logo of the United Nations is seen in the General Assembly hall before heads of state begin to address the 76th Session of the U.N. General Assembly in New York City, U.S., September 21, 2021. REUTERS/Eduardo Munoz/Pool

By Emma Farge

GENEVA (Reuters) -A United Nations agency warned on Monday of the risk of a monetary policy-induced global recession that would have especially serious consequences for developing countries and called for a new strategy.

"Excessive monetary tightening could usher in a period of stagnation and economic instability" for some countries, the United Nations Conference on Trade and Development (UNCTAD) said in a statement released alongside its annual report.

"Any belief that they (central banks) will be able to bring down prices by relying on higher interest rates without generating a recession is, the report suggests, an imprudent gamble," it said.

The report said that higher interest rates, including hikes by the U.S. Federal Reserve, would have a more severe impact on emerging economies, which already have high levels of private and public debt. The report, entitled "Development prospects in a fractured world", also warned of a potential debt crisis in the developing world.

"The current course of action is hurting vulnerable people everywhere, especially in developing countries. We must change course," UNCTAD Secretary-General Rebeca Grynspan told a press conference in Geneva.

Asked about solutions, she suggested there were other ways to bring inflation down, mentioning windfall taxes on corporations, better regulations to control commodity speculation and efforts to resolve supply-side bottlenecks.

"If you want to use only one instrument to bring inflation down...the only possibility is to bring the world to a slowdown that will end up in a recession," she said.

Overall, UNCTAD revised down its 2022 global growth projection to 2.5% from the earlier 2.6% estimated in its March assessment. It expects growth of 2.2% in 2023.

The International Monetary Fund also warned last month that some countries may slip into recession next year and revised its growth forecast downwards.

U.N. agency warns of recession linked to 'imprudent' monetary policy
 

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Comments (2)
Fufi Cautious Trader
Fufi Oct 03, 2022 3:28PM ET
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easy money was at the culprit of 2008 financial crisis. easy money has quadruple the risks banks have on their book or swept under the rug. to the tune of 200 TRILLIONS. read the second quarter 2023 report of the office of the comptroller of the currency and see for yourselves. absent full regulations, we need to tight the money supply.
Fufi Cautious Trader
Fufi Oct 03, 2022 3:28PM ET
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I meant 2022 report...not 2023
Carrascal Eduardo
Edouard Oct 03, 2022 3:17PM ET
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The world is clamoring about the erroneousness of a sharp rise in interest rates, useless to reduce the inflation that we are experiencing if it is not with rates greater than 6%, which is a disaster for all, the dollar world, a general loss of confidence in the USDolar, most underdeveloped countries and developed countries with energy problems and other problems. The FED (and Biden) should lend an ear please. USD can´t no longer support its task in the SMI, it is necessary to reform the System without delay.
 
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