Stagflation threatens global economy, warns World Bank

Stagflation stalks global economy: World Bank warns high inflation and sluggish growth threaten to derail Covid recovery

Central banks face a growing headache as stagflation stalks the global economy.

The World Bank has said a period of high inflation and tepid growth, reminiscent of the 1970s, threatens to “derail what is now a precarious recovery” from Covid. And he said it would be “difficult” for many countries to avoid recession.

The grim warning comes as the European Central Bank prepares to end its massive pandemic-era money printing program tomorrow, clearing the way for it to hike interest rates.

The World Bank said a period of high inflation and tepid growth, reminiscent of the 1970s, threatened to ‘derail what is now a precarious recovery’ from Covid

Next week the Bank of England and the US Federal Reserve will also wrap up their final monetary policy meetings – and face the conundrum of whether they too should raise interest rates further to keep inflation under control or weather the economic downturn.

World Bank President David Malpass said: “The war in Ukraine, lockdowns in China, supply chain disruptions and the risk of stagflation are hammering growth. For many countries, the recession will be hard to beat. to avoid.

The Bank of England has a particularly difficult job. Not only is Britain struggling with the energy crisis and the effects of war, but it also suffers from a shortage of labour. This causes searing inflation, which squeezes family finances.

Data released by S&P Global yesterday showed that the loss of momentum in Britain’s dominant services sector last month – covering everything from shops to banks – was the largest on record, except for three months during Covid closures.