The Bank for International Settlements (BIS), aka the ‘bank for central banks’, has warned that the global economy is at a critical juncture.
Launching his annual report, BIS chief Agustin Carstens said the task for central banks was clear: raise rates until inflation cools. But his message to governments was more blunt: stop “obsessively [pursuing] short term growth”.
Why? Carstens says if governments don’t rein in spending and/or raise taxes, we run the risk of persistent inflation, financial instability, and even a recession.
Intrigue’s take: Sheesh. Way to kill the buzz, Carstens.
But he does offer us a glimpse of hope, saying there’s a sense the economy can still achieve a “soft-ish” landing. It’ll just require some tough choices: which spending to cut, which taxes to raise, and by how much?
That’s probably why he ends his speech calling for “a degree of courage”.
Also worth noting:
- Carstens was previously Mexico’s central bank chief for eight years.
- In 2022, the world spent $13T on interest payments (14.5% of global GDP); most expect that figure to rise this year.