The Federal Reserve's rate hikes could set the stage for financial crises in the Global South.
Financial crises — such as the kind that higher interest rates in the U.S. may spark — increase the chance of economic slowdowns or even recessions. Worryingly, the World Bank has warned that developing nations face a “
” that will only increase rates of poverty. And history has shown that the impact of such economic conditions fall hardest on lower-skilled low-income people., such as cuts in spending and government services, which, again, disproportionately hit the less well-off. And if a country is struggling to pay back sovereign debt as a result of higher global interest rates, then it also has less cash to help its poorest citizens.
So in a very real sense, a period of higher interest rates in the U.S. can have a detrimental effect on the economic, political and social well-being of developing nations. There is a caveat, however. With inflation in the U.S. slowing, further interest rate increases may be limited. It could be the case that regardless of whether Fed policy has threaded the needle of slowing the U.S. economy but not by too much, it has nonetheless sown the seeds of more potentially severe economic — and social — woes in poorer nations.So are we! That’s why we’re on a mission to shake things up and bring you the stories and perspectives that often go untold in mainstream media.
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