Risks of global recession approaching

Risks of global recession approaching  

The war in Ukraine, Russia sanctions, China’s “zero COVID” procedures, spiking inflation, and interest hikes by the United States Federal Reserve are all ready to crumple growth in 2022.

Whether worsening conditions and ill-judged policy choices could tip the global economy from a downshift into a contraction.

Tara Sinclair, an economics professor at the George Washington University in Washington, DC, told Al Jazeera that recessions are tough to predict. Even good forecasters, e.g., the Fed, only know we’re undergoing a recession once we’re in one, not in advance.

In general, policymakers underweight recessions in their predictions and focus on predicting the economy in standard times.

In the US, the Federal Reserve encounters the delicate task of cooling inflation, which is four-decade high, without increasing rates so sharply that it brings on a recession. Historically, the central bank has struggled to pull off such “soft landings.” Most economists reason it had only done so once, in 1994, when then-chair Alan Greenspan oversaw a doubling of the benchmark rate without killing economic growth.

 

New dangers for the global economy

A downturn in the world’s biggest economy, which registered its most rapid expansion in decades last year, would echo globally, endangering to send growth into reverse scarcely two years after the world economy shrank 4.3 percent due to the epidemic.

In an op-ed last month, Bill Dudley, the ex-president of the Federal Reserve Bank of New York, warned that a recession was now “virtually inevitable” as the Federal Reserve had delayed too long to tighten policy.

US Fed Chair Jerome Powell, who is anticipated to oversee at least six more rate increases this year after a quarter percentage point hike last month, has urged the central bank can “more likely than not” achieve a soft landing.

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