New Delhi:- On June 22, 2023, the Bank of England shocked the market by raising interest rates by 0.5 percentage points to the highest level in 15 years. The European Central Bank, as well as central banks in Australia, Canada, Switzerland, and Norway, have announced interest rate hikes in recent weeks.

Even Turkey, which has cut interest rates over the past two years to combat inflation (a step economists say is pointless), returned to Econ 101 yesterday, raising interest rates by 6.5 percentage points.

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Perhaps it will be so here as well. The Fed last week decided to keep rate hikes on hold, but Chairman Jerome Powell told the U.S. Capitol yesterday that Americans should expect one or two more rate hikes this year.

Because even if buying eggs and gasoline isn't as painful as it used to be, the prices of many consumer goods and services are still rising at an uncomfortably fast rate. The CPI, a broad measure of inflation, rose 4% in May, double the Fed's 2% target.

Inflation is expected to peak at 6.2% in 2022 before declining to 3.5% in 2023. Average inflation over the 2024-2027 period is expected to be just 1.8%, below the Fed's 2% target. The January 2023 update to the World Economic Outlook forecasts that global growth will slow to 2.9% in 2023 but will increase to 3.1% in 2024.

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The 2023 forecast is 0.2 percentage points higher than the October 2022 World Economic Outlook forecast but below the historical average of 3.8 percent. Rising interest rates and the war in Ukraine continue to weigh on economic activity. China's recent resumption of economic activity has paved the way for a faster-than-expected recovery. 

A Survey by the IMF staff is usually published twice a year. It presents IMF staff economists' analyses of global economic developments during the near and medium term. Chapters give an overview as well as a more detailed analysis of the world economy; consider issues affecting industrial countries, developing countries, and economies in transition to market; and address topics of pressing current interest. Annexes, boxes, charts, and an extensive statistical appendix augment the text.

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Together with the central bank, all trying to turn up the air conditioning in our homes a little bit so as not to cause chaos (i.e. recession). But the longer inflation lasts, the harder it becomes. The expectations are ruling over the world as they are not working accordingly and are affecting some of the sectors in the world.