There are concerns that interest rates will need to rise significantly to control inflation, restrict economic development, and keep sentiment weak. The Bloomberg Commodity Spot Index of raw materials has reached a new high, highlighting global pricing pressures.
The World Bank cut its global growth projection on Tuesday and warned that several nations might enter recession as the economy enters a stagflation phase reminiscent of the 1970s. According to the Washington-based bank’s latest Global Economic Prospects report, global economic expansion is likely to fall to 2.9 per cent this year from 5.7 per cent in 2021 — 1.2 percentage points lower than the 4.1 per cent predicted in January. Growth is likely to hang around that level from 2023 to 2024, while inflation remains over goal in most nations, pointing to stagflation risks, according to the research.
Russia’s invasion of Ukraine and the subsequent increase in commodity prices have exacerbated the global economy’s already-existing Covid pandemic-induced harm, which the World Bank has described as “a protracted period of sluggish growth and rising inflation.
According to the research, growth in advanced economies is expected to slow drastically to 2.6% in 2022 from 5.1% in 2021, slowing a further 2.2% in 2023.
Meanwhile, growth in emerging markets in developing nations is expected to slow to 3.4 per cent in 2022, down from 6.6 per cent in 2021 and below the annual average of 4.8 per cent from 2011 to 2019.
The World Bank advised governments to coordinate aid for Ukraine, mitigate the rise in oil and food costs, and establish debt relief for developing nations to avoid history repeating itself.
Bitcoin is flirting with the 30K price level on Wednesday; earlier, it dipped below the key level of $30,000, as its recent sell-off remains in focus.
The bitcoin price was recently down by less than 1% at $31,139.83. It had plummeted as low as $29,207.77 earlier after rising more than 4% the previous session to trade above $31,000.
On Tuesday, ether recouped previous losses and traded less than 1% down at $1,850.36. It had previously fallen as low as $1,725.01.
The central bank of India hiked the benchmark interest rate for the second month in a row to keep prices from rising over its target band since the beginning of the year. The rate-setting panel of the Reserve Bank of India voted unanimously to boost the repurchase rate by 50 basis points to 4.90 per cent. Seventeen analysts predicted a 50 basis point increase in a Bloomberg poll, while the remainder predicted hikes ranging from 25 to 75 basis points.
In addition, the central bank boosted its inflation prediction for the fiscal year ending March to 6.7 per cent from 5.7 per cent earlier. The RBI’s inflation goal range is 2% to 6%. With inflation expected to remain over the tolerance threshold for three quarters, the Fed announced its determination to remain accommodating.
In an online briefing, RBI Governor Shaktikanta Das stated that inflation had climbed considerably beyond the upper tolerance limit. He noted that a significant chunk of the spike in inflation might be traced to a series of supply shocks associated with the conflict.
This year, more than 50 central banks worldwide boosted interest rates by at least a half per cent.
The Japanese yen traded at 133.03 per dollar, down from levels below 132 recorded yesterday. Following yesterday’s rebound from depths below $0.72, the Australian dollar traded at $0.7227.
Crude futures were buoyed by tight supply and improving gasoline demand after China’s biggest cities eased Covid-19 limitations on Wednesday, ahead of news on U.S. oil stocks. Brent oil futures for August increased 22 cents, or 0.2 per cent, to $120.79 a barrel at 0012 GMT, after reaching their highest level since May 31 on Tuesday. For July, U.S. West Texas Intermediate oil price was $119.65 a barrel, up 24 cents, or 0.2 per cent, from its highest closing since March 8 on Tuesday.