UN accuses richest nations of ‘imprudent gamble’ in inflation fight
The interest rate rises and austerity the world’s richest nations are using to fight sky-high inflation risk a painful global recession that would hurt developing countries most, the UN has warned.
In its annual trade and development report, the UN Conference on Trade and Development (Unctad) said a drive by major central banks to ramp up rates in response to soaring prices represented an “imprudent gamble” that could dangerously backfire.
The UN agency said an urgent “course correction” was required to prevent a cascading series of crises of debt, health, and climate emergency for poorer countries struggling to cope with the economic hit from the Covid pandemic and Russia’s war in Ukraine.
The intervention comes as global central banks sharply increase interest rates to combat inflation at the highest levels for four decades. The US Federal Reserve is weighing a further sharp rise in rates from next month, alongside similar moves by the Bank of England and the European Central Bank.
However, Unctad said political leaders and central bankers in advanced economies were making the mistake of harking back to hawkish policies used in the 1970s and 80s to squeeze inflation out of the system, which it said were inappropriate for the world’s current juncture.
Challenging the assumption that a sharp monetary shock administered by central bankers was required, it said much of the current inflationary burst was being driven by soaring prices for energy, food, and friction in global trade rather than excess demand for goods and services.
The report said measures including strategic price controls, windfall taxes, anti-trust measures and tighter regulations on commodity speculation were needed to combat inflationary pressures at source
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