The Banking Executive Magazine - July 2022 Issue

ISSUE 163 JULY 2022 the BANKING EXECUTIVE 1 Editorial CENTRAL BANKS’ AGGRESSIVE APPROACHES TOWARDS INFLATION As inflation is rapidly escalating and affecting a wide range of goods and services, central bankers around the world are raising interest rates making borrowing more expensive. It is an unprecedented moment for the international community as countries around the world try to bring fast price increases under control before they become a more lasting part of the economy. Since the beginning of 2021, inflation has risen in many developed and emerging nations as strong demand for goods collided with shortages brought on by the pandemic. Central banks spent months anticipating that economies would recover, triggered by the opening of the shipping lanes to ease supply shortages. That hasn't happened, and the conflict in Ukraine has only made things worse by disrupting oil and food supplies, pushing prices even higher. As a result, this year, at least 75 central banks raised interest rates - many from historically low levels -. While legislators cannot do much to control high energy prices, higher borrowing costs could help slow consumer and business demand to give supply a chance to catch up across an array of goods and services so that inflation does not continue indefinitely. However, this global increase in interest rates which is leading to a decrease in borrowing, is fueling investor concerns that the global economy could slow sharply — and that some countries could find themselves dragged into a severe recessions. If inflation does become entrenched or even begins to signal a change in expectations, central banks may have to respond even more aggressively than they are now, intentionally crushing growth. Dr. Joseph Torbey, Chairman - World Union of Arab Bankers