To Avoid a Global Recession the Fed Should Ease Interest Rate Hikes – UN Report

Caution should not be thrown to the wind when it comes to tightening fiscal and monetary policies because this could trigger a global recession, according to a UN agency report.

The Trade and Development Report 2022 by the United Nations Conference on Trade and Development (UNCTAD) highlighted:

“The world is headed towards a global recession and prolonged stagnation unless we quickly change the current policy course of monetary and fiscal tightening in advanced economies.”

The Federal Reserve (Fed) has been setting the ball rolling in terms of interest rate hikes, which have been detrimental to the crypto market as bears continue to bite. 

Since June this year, the Fed has adopted the strategy of increasing interest rates by 75 basis points (bps), a scenario last seen in 1994.

Market analyst Michael van de Poppe recently pointed out that the situation had become dire to the extent that the crypto market is positively skewed towards the decisions made at the federal open market committee (FOMC) meetings.

Sam Bankman-Fried, the CEO of crypto exchange FTX, also noted that despite the federal reserve being caught between a rock and a hard place, it was driving the current crypto downturn because both markets and people were scared.

Therefore, the interest rate hike trend has made UNCTAD concerned since tightened macroeconomic conditions affect the most vulnerable. Per the report:

“All regions will be affected, but alarm bells are ringing most for developing countries, many of which are edging closer to debt default.”

UNCTAD stated that raising interest rates sharply would make life harder for heavily indebted governments, households, and firms. Moreover, growth would be slashed altogether.

“There is still time to step back from the edge of recession. The current course of action is hurting the most vulnerable. This is a matter of policy choices and political will,” UNCTAD Secretary-General Rebeca Grynspan added. 

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