Collective action is necessary to fight global inflation

THE world’s leading finance ministers are gathering in Washington, DC this week for the annual meetings of the International Monetary Fund (IMF) and World Bank group, at a time when the global economy is facing major challenges, topped by the high inflation that has driven up interest rates and stirred fears of a worldwide economic recession.

In that context, it would not be an exaggeration to contend that America’s Federal Reserve now has the global economy in its hands. Its aggressive interest rate hikes are forcing the rest of the world’s central banks to keep up.

To put it in simple terms, a rate rise in one country as part of an effort to cool inflation attracts money from investors elsewhere, causing the currency to strengthen and helping to reduce import costs.