Photo taken on June 1, 2022 shows the US Federal Reserve in Washington, DC, the United States. (Xinhua/Liu Jie)
CAIRO, Oct. 2 (Xinhua). has said.
In response to the US Federal Reserve’s (Fed) recent sharp rate hikes, central banks in both developed and developing countries are “drastically raising interest rates, which in some countries have doubled the Fed’s hike, as they try to ease the cost of living crisis.” to cope with,” the Egyptian economist said in an interview with Xinhua.
The Fed has raised interest rates three times so far this year, by 75 basis points, as the United States tries to curb inflation.
After the Russia-Ukraine conflict and the supply chain problem, food and fuel prices have skyrocketed, putting an unprecedented burden on developing countries in fighting inflation and maintaining their dollar reserves, Shafei added.
He expected the Fed to continue raising interest rates, causing more families around the world to suffer the effects of inflation and the difficulty of meeting their daily needs.
“The problem is that the US dollar is the world’s base currency and countries are now suffering from a shortage of the American currency and increasing its value against their local currencies,” Shafei said, adding that many countries are taking steps to improve to mitigate the impact of the appreciation of the dollar.
A woman buys groceries at a food truck in New York, the United States, May 11, 2022. (Credit: Xinhua/Wang Ying)
He emphasized that the Fed’s decisions have negatively impacted all countries in the world, especially developing countries, as the Fed’s rate hike often triggers capital outflows from these countries.
The international economy is only a few steps away from stagflation due to the Russia-Ukraine conflict, energy shortages and rising prices, and the US Federal Reserve’s interest rate hikes are only making the situation worse, Shafei added.
About $22 billion in investments have left Egypt since March this year, Egypt’s Finance Minister Mohamed Maait said last month.
“Egypt is now struggling to make new plans to deal with such a crisis,” Shafei said, referring to the Egyptian central bank’s recent interest rate fix to attract investment in the country, whose economy is struggling with the impact COVID-19 and other disruptions.
Rising interest rates mean an increase in production costs in developing countries, forcing investors to borrow at higher costs, which in turn will further push up commodity prices, the expert added. ■
