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Rate hikes to combat inflation could deepen global economic divergence -Breaking

by Mike Robinson

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© Reuters. FILE PHOTO – A man in a mask walks by closed shops during the COVID-19 (coronavirus disease) epidemic that erupted in Kuala Lumpur on May 28, 2020. REUTERS/ Lim Huey Teng

WASHINGTON, (Reuters) – Interest rate increases aimed at fighting inflation may exacerbate the “dangerous and deepening” divergence between economic development in advanced and developing countries Kristalina Georgieva, IMF Managing director said Wednesday.

Georgieva claimed that inflation wasn’t a widespread phenomenon. However, it was an issue in several countries, and particularly in the United States. The U.S. witnessed a 7% increase in consumer prices in the twelve months leading up to December. This was the biggest annual rise in over 40 years.

Georgieva said that although the Federal Reserve Bank and other central banks were well-versed in managing inflation, there was still a lot to do. The “spillover effect” on emerging markets …. could add to the heat of divergence.

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