The world economy is encountering a huge crisis due to high inflation that is triggering fears among investors.
The latest onslaught of coronavirus pandemic, which devastated the world economy in 2020 and 2021, and the Russia-Ukraine war are contributing the rise in global inflation.
The United Nations has projected the global inflation at 6.7 per cent in 2022, twice the average of 2.9 per cent recorded during 2010–2020.
News of concern is coming from different countries with consumers struggling to deal with the rising prices of food and other necessities.
Production is declining in Eastern and Western countries, including Asia. In this situation, investors are losing confidence in the market.
The US stock markets have recently had the lowest rate of decline in 50 years. Bangladesh is not free from the wave of inflation in the world economy.
In keeping with the global trend, stock prices in Bangladesh have plummeted creating panic among investors.
Bangladesh Bank has already announced a contractionary monetary policy to curb inflation.
The central bank is trying to curb inflation by reducing money supply in the market. Therefore, the target of credit flow in the private sector has also been reduced.
Top executives at the world's three largest central banks have warned that lower inflation and lower interest rates are going to be history.
Top executives from the US Federal Reserve, the European Central Bank and the Bank of England have met in Portugal and called for swift action to keep commodity prices in control.
Asked how far the recession could go due to the Ukraine-Russia war and the Corona superpower, they agreed that the risk now seemed greater.
In addition, it is not difficult to manage this risk in the long run, but the big mistake that world leaders have made is not controlling commodity prices.
At present, the Bank of England, along with the United States, has raised interest rates from one percent to one-quarter percent.
Economists also think that the way different countries have raised interest rates will continue for a few more years. There are no signs of interest rate cuts anytime soon.
Capital markets around the world have plummeted amid fears that high inflation could slow economic growth.
Investors are panicking and selling their shares. According to international media reports, the S&P (Standard and Poor) index of the US stock market has had the biggest fall in the last 50 years.
Note that S&P has been formed with the top 50 companies traded. The S&P index has declined by 20.6 percent in the last six months.
Besides, other indicators of the country's capital market have also declined. Shares of Nasdaq and Dow Jones are also falling.
Outside the United States, stock markets in the United Kingdom, the European Union and Asian countries are also falling. In the UK, the FTSE-250 index has fallen 20 percent this year.
Europe's Stocks-600 index also fell 17 percent. Shares in Asia and the Pacific also fell 18 percent. The central banks of different countries are working desperately to reduce the cost of living of the people.
In particular, the idea of keeping food and fuel costs within reach is now on a large scale.
Economists say the recession in the world economy started a long time ago. However, people’s suffering is increasing due to the continuous increase in interest rates. Top Chinese economist Dran Wang told the BBC that the rise in US Federal Reserve interest rates has had a negative impact on capital markets there. If the Russia-Ukraine war continues, the recession will increase.
The United Nations agency, the UN Conference on Trade and Development (UNCTAD), has said that the global economy is expected to grow by 2.6 percent this year due to the ongoing recession.
Earlier, it was estimated at 3.6 percent. According to the agency, the recession will be long-term in Russia.
The countries of Western and Central Europe and the countries of South and East Asia will not be left out of this recession.
In this recession, countries will be forced to reduce their development spending. This geographical problem can provoke various internal problems. As food and fuel prices continue to rise, there is already a lot of social unrest in developing countries.
Over-reliance on food and energy will hamper investment and production in these developing countries.
Trade deficits between countries increase due to imports of essential commodities increase.
Bangladesh's central bank has also taken some steps in the wake of the global economic downturn.
Monetary policy has recently been announced for the financial year 2022-23. It has tried to curb inflation by reducing the supply of money.
The target of credit flow to the private sector has also been reduced. Bangladesh Bank says the biggest challenge for the new financial year is to control inflation.
However, there is little that can be done to address this challenge without the use of some central bank instruments.
One of the main tools is to control the flow of money. That means giving loans at low rates to the private sector. For this, the credit flow of the private sector in the monetary policy for the current fiscal year has been reduced from the target of the last fiscal year.
