The Inflation Rise and the Global Recession
Facts:
1) The US consumer price index (inflation metric) grew 8.2% in September 2022 compared to the previous year - the fastest rate in 40 years.
2) Due to the Russia-Ukraine war and consequent sanctions from US and EU, energy prices soar, causing inflation -> the US Federal Reserve is increasing the interest rate and is likely to do so further (graph attached).
Analysis:
1) The increasing interest rate in the US pushes the dollar price up, which elevates import and debt service costs for other countries.
2) The US increasing interest rate causes other countries to raise their interest rates to protect their currencies, which is detrimental to economic growth.
3) Global recession risks are rising.
4) The World Bank forecasts 1.9% economic growth next year, down from the 3.2% forecast it made for 2022.
Inspired by WSJ
