Key facts:
The fall in bitcoin prices contributes more to the crisis, says BIS report.
Inflation is already above 5% in three-quarters of the world economy.
“Restoring low and stable inflation without inflicting serious damage is the main challenge facing today’s economies. We are facing a challenge that central banks had not faced for decades and that requires great efforts.
With this phrase, the Bank for International Settlements (BIS) summarizes the main problems that, in its opinion, the world economy is currently facing, among which inflation and lack of growth.
This is a mix that could trigger a further slowdown, including a recession, leading to what is known as stagflation.
The organism presented his vision about what is being lived in most of the world’s major economiesthrough its “Annual Report on the Economy 2022” published on June 26.
In the report, which analyzes what happened throughout 2021 and so far in 2022, the BIS notes that, for the first time in the post-World War II era, global economy it faces a strong inflationary threat and the danger of recession.
This is an unfavorable global scenario that has also been predicted by other international organizations, and to which the World Bank referred earlier this month.
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The return of inflation
The BIS report focuses its analysis on the way in which a large number of countries have seen inflation rates grow in an unusual way.
By April 2022, three quarters of economies were experiencing inflation above 5%. Inflation has returned, not as a long-sought friend, but as a threatening foe.
Bank for International Settlements.
On this subject, CriptoNoticias has reviewed the growing increase in inflation levels, both in the United States, countries of the European Union and in other areas of the region, such as the United Kingdom and Switzerland. In all of them they have had to resort to raising interest rates as a measure to curb the pressure.
The BIS study explains that the current inflationary escalation is in a context of high financial vulnerabilities. Such weaknesses were caused, first of all, by the Covid-19 pandemic and later by the war in Ukraine. Added to this is the slow growth of China.
For the organism, achieving a “soft landing” that solves the current problem is difficult. “The costs of bringing inflation back under control can be very high and the starting conditions are in many unfavorable aspects”, according to what they note.
By this they mean that the global monetary and financial system is in a state of “stress”, immersed in dealing with the rapid changes required by the digital revolution, among other factors.
It is also influenced by the fact that “the world of cryptocurrencies has also entered into crisis». This, from the sharp drop in prices experienced in recent months.
Analysts cite, at this point, the collapse of Terra and the precipitous drop in the value of bitcoin (BTC), calling them turning points that show that this new ecosystem is not the alternative, and can’t support to the global financial system.
This conclusion, which emphasizes the weaknesses of the cryptocurrency sector and casts doubt on its ability, is an idea that is reiterated in this analysis. The BIS has already made this point previously, in its report on the international payment system published last week and reviewed by this medium.