Ms. Georgieva pointed out that about three-quarters of the institutions the fund tracks have raised interest rates since July 2021. Developed economies have lifted them by 1.7 percentage points on average, while emerging economies have moved by more than 3 percentage points.
8 Signs That the Economy Is Losing Steam
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Retail sales. The latest report from the Commerce Department showed that retail sales fell 0.3 percent in May, and rose less in April than initially believed.
Consumer confidence. In June, the University of Michigan’s survey of consumer sentiment hit its lowest level in its 70-year history, with nearly half of respondents saying inflation is eroding their standard of living.
Start-up funding. Investments in start-ups have declined to their lowest level since 2019, dropping 23 percent over the last three months, to $62.3 billion.
The stock market. The SP 500 had its worst first half of a year since 1970, and it is down nearly 19 percent since January. Every sector of the index beyond energy is down from the beginning of the year.
Copper. A commodity seen by analysts as a measure of sentiment about the global economy — because of its widespread use in buildings, cars and other products — copper is down more than 20 percent since January, hitting a 17-month low on July 1.
Oil. Crude prices are up this year, in part because of supply constraints resulting from Russia’s invasion of Ukraine, but they have recently started to waver as investors worry about growth.
The bond market. Long-term interest rates in government bonds have fallen below short-term rates, an unusual occurrence that traders call a yield-curve inversion. It suggests that bond investors are expecting an economic slowdown.
In recent years, emerging markets have often raised interest rates in anticipation of the Fed’s slow and steady moves to avoid big swings in their currency values, which depend partly on interest rate differences across borders. But this set of rate increases is different: Inflation is running at its fastest pace in decades in many places, and a range of developed-economy central banks, including the European Central Bank, the Swiss National Bank, the Bank of Canada and the Reserve Bank of Australia, are joining — or may join — the Fed in pushing rates quickly higher.
“It’s not something we’ve seen in the last few decades,” said Bruce Kasman, chief economist and head of global economic research at JPMorgan Chase.
The last time so many major nations abruptly raised rates in tandem to fight such rapid inflation was in the 1980s, when the contours of global central banking were different: The 19-country euro currency bloc that the E.C.B. sets policy for did not exist yet, and global financial markets were less developed.
That so many central banks are now facing off against rapid inflation — and trying to control it by slowing their economies — increases the chance for market turmoil as an era of very low rates ends and as nations and companies try to adjust to changing capital flows. Those changing flows can influence whether countries and businesses are able to sell debt and other securities to raise money.
“Financial conditions have tightened due to rising, broad-based inflationary pressures, geopolitical uncertainty brought on by Russia’s war against Ukraine, and a slowdown in global growth,” Janet L. Yellen, the U.S. Treasury secretary, said in speech last week. “Now, portfolio investment is beginning to flow out of emerging markets.”
Article source: https://www.nytimes.com/2022/07/17/business/economy/global-central-banks-inflation.html
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