According to Rob Subbaraman, who spoke to CNBC’s Street Signs Asia program on Tuesday, the only goal of most central banks at the moment is to reduce inflation.
“They’re going to be very ambitious because confidence in monetary policy is too valuable an asset to lose,” Subbaraman said. “We’ve been trying to draw attention to the risk of recession for months and we were worried. Now we are one of many developed countries that will fall into the middle of an economic recession.
In addition to the United States, Nomura expects recessions next year in EU countries, the United Kingdom, Japan, South Korea and Australia, according to the research note.
“THEY NEED TO TAKE CONTROL AGAIN”
According to Subbaraman, central banks around the world have for a long time implemented excessively relaxed monetary policies, hoping that inflation will be temporary. In his statements to CNBC, Subbaraman said banks now need to make up for this situation and bring inflation back under control.
In Subbaraman’s words:
‘Another issue I’ve been trying to draw attention to is that with many weakening economies, exports cannot be counted on for growth. That’s one reason why we think the risk of a recession is quite real and possible.’
American and European central banks are trying to rein in record inflation with rate increases. The American central bank increased the benchmark interest rate by 75 points in June, bringing it to the range of 1.5 percent to 1.75 percent, and it was signaled that it could increase by 50 or 75 more points.
“FED WILL CONTINUE TO INCREASES INTEREST INTEREST”
“Inflation is expected to be persistent and hard to contain, which is the reason for the US central bank’s tight intervention. The US central bank will increase by 75 points in July and then by 50 points,” Subbaraman said. Then the fund rate will continue to increase by 25 points until it reaches 3.75 percent.’
“If central banks do not tighten their monetary policies to control inflation, it will be difficult for economies to endure high inflation,” Subbaraman said. The situation will be especially difficult for the public. It’s hard to say this sweetly… It will be better to endure a little pain to restrain inflation than the consequences of inflation. We saw that in the 1970s,’ he warned.