Rate hikes will lead to financial stress, says World Bank economist – Times of India

MUMBAI: The synchronised monetary tightening by central banks would lead to financial stress and regulators would need to be watchful, said World Bank (WB) economist Ayhan Kose.
Kose said that while central banks were rightly targeting inflation since without price stability there could not be macroeconomic stability, they need to make sure they take into account the implication of their policies. “In an environment where everyone is increasing interest rates, the likelihood of financial stress also increases. So, the regulatory bodies have to be on top of the issues relating to balance sheet mismatches,” he said.
Speaking at a session on economic recovery in the 21st World Congress of Accountants (WOCA), Kose said that the last time interest rates rose sharply, it led to a global recession in 1982. “That also marked the beginning of the Latin American debt crisis and debt crisis in a number of low-income countries,” he said. Kose said that there is a significant amount of debt on the private sector in many countries that needs to be monitored.

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