World Bank: Global rate hikes could trigger 2023 recession

Rate hikes by central banks around the world could trigger a global recession in 2023, the World Bank has said.

Central banks have hiked rates “with a synchronicity not seen in the past five decades” to counter rising prices, it said.

Rising interest rates make borrowing more expensive in an attempt to curb the pace of price increases.

But it also makes borrowing more expensive, which can slow economic growth.

The World Bank’s warning comes ahead of the Federal Reserve’s and Bank of England’s monetary policy meetings, which are expected to raise interest rates next week.

On Thursday, the World Bank said the global economy was in its worst slowdown since 1970.

A study found that “the world’s three largest economies — the US, China and the eurozone — have slowed sharply.”

“Under the circumstances, even a moderate hit to the global economy next year could plunge it into recession,” it said.

The World Bank also called on central banks to coordinate their actions and “clearly communicate policy decisions” to “reduce the magnitude of the tightening needed.”

Inflation, the rate at which prices are rising, hit a 40-year high in the US and UK in recent months.

This was due to higher demand as pandemic restrictions eased and the war in Ukraine pushed up energy, fuel and food prices.

In response, central bank policymakers have raised interest rates to dampen demand from households and businesses.

However, sharp hikes in interest rates increase the risk of a recession as it can cause the economy to slow down.

Central banks generally do not make policy decisions about their counterparties.

However, in the past they have coordinated their actions to support the global economy.

In 2007, a global financial crisis was triggered by a US subprime mortgage crisis.

After the collapse of the investment bank Lehman Brothers in September 2008, this developed into a full-blown crash.

A month later, the Fed, together with the European Central Bank and central banks in Canada, Sweden and Switzerland, jointly cut interest rates.

They said in a statement that “the deepening of the financial crisis has increased downside risks to growth and thus further reduced upside risks to price stability.”

“Therefore, some easing in global monetary conditions is warranted,” they added.