Page 30 - bon-dia-aruba-20220506

A30 world news
Diabierna 6 Mei 2022

Rising interest rates in US will hinder foreign economies

start looking more attrac- surgent inflation in the Unit- 1990s under Fed Chair Alan
tive to global investors. So ed States. Greenspan, an episode that
they can pull money out of ended unhappily for many
poor and middle-income The inflationary surge is developing countries.
countries and invest it in the the result of an unexpect-
United States. Those shifts edly strong recovery from “The U.S. was able to man-
drive up the U.S. dollar and the pandemic recession of age inflation well and avoid
push down currencies in the 2020, a rebound that caught recession,” Rojas-Suarez said,
developing world. businesses by surprise and “but at the same time created
forced them to scramble to huge spillovers for emerg-
Falling currencies can cause find workers and supplies to ing markets.’’ What followed
problems. They make it more meet customer demand. The was a series of financial crises
expensive to pay for import- result has been shortages, — in Mexico, in Russia and
ed food and other products. delays in filling orders and eventually across much of
That is especially worrisome higher prices. In March, U.S. Asia.
at a time when supply chain consumer prices rose 8.5%
bottlenecks and the war in from a year earlier — biggest Robin Brooks, chief econo-
(AP) — When the Feder- banks to stay “mindful of the Ukraine have already dis- jump since 1981. mist at the Institute of In-
al Reserve raises interest spillover risks to vulnerable rupted shipments of grain ternational Finance, notes
rates — as it did Wednes- emerging and developing and fertilizer and pushed up By pushing up interest rates, that many emerging mar-
day — the impact doesn’t economies.” food prices worldwide to the Fed is hoping to pull off a ket countries are in a much
stop with U.S. homebuy- alarming levels. so-called soft landing — rais- stronger financial position
ers paying more for mort- Citing the harsher financial ing rates just enough to slow than they were back then, or
gages or Main Street busi- conditions, the IMF recently To defend their sinking cur- the economy and bring infla- even in 2013, when Fed plans
ness owners facing costlier downgraded the outlook for rencies, central banks in de- tion under control but not to cut back its easy money
bank loans. economic growth this year veloping countries are likely enough to tip the U.S. econ- policies sent investment flee-
in developing and emerging to raise their own rates; some omy into another recession. ing the developing world.
The fallout can be felt be- market countries to 3.8%, a have already started. That can
yond America’s borders, full percentage point below cause economic damage: It Developing countries are For one thing, many have
hitting shopkeepers in Sri what it forecast in January. slows growth, wipes out jobs worried the Fed waited too beefed up their foreign cur-
Lanka, farmers in Mozam- and squeezes business bor- long to begin its anti-infla- rency reserves, which cen-
bique and families in poorer The Fed on Wednesday rowers. It also forces indebted tionary campaign and will be tral banks can use to buy and
countries around the world. raised its benchmark short- governments to spend more forced to raise rates so aggres- support their countries’ cur-
The impacts abroad range term rate by half a percentage of their budgets on interest sively it causes a hard landing rencies or meet foreign debt
from higher borrowing costs point to its highest level since payments and less on things that hurts the United States payments in a crisis. On the
to depreciating currencies. the pandemic hit two years like fighting COVID-19 and and developing countries eve of the 1997-1998 Asian
ago, and signaled that more feeding the poor. alike. financial crisis, for instance,
“It will put pressure on all rate hikes will come. Thailand’s reserves were
types of developing coun- The IMF’s Georgieva has “They would have been equal to 19% of its economy;
tries,” said Eric LeCompte, The U.S. rate hikes can de- warned that 60% of low-in- much better off if the Fed now they’re at 47%, accord-
executive director of the Ju- liver long-distance damage in come countries are already in would have reacted more ing to the institute, a trade
bilee USA Network, a coali- a number of ways. First, they or near “debt distress” — an swiftly when the problem group for global banks.
tion of groups seeking to re- could slow the American alarming threshold reached started” last year, said Liliana
duce global poverty. economy and reduce U.S. when their debt payments Rojas-Suarez, senior fellow Brooks also says that rising
consumers’ appetite for for- equal half the size of their na- at the Center for Global De- raw materials prices are “a bit
The managing director of eign goods. tional economies. velopment. of windfall” for commodities
the International Monetary exporters like oil-producing
Fund, Kristalina Georgieva, They also affect global in- Despite the risks of collateral The Fed does not have an Nigeria and soybean-pro-
was worried enough last vestment: As rates rise in the damage, the Fed is expected impressive record of engi- ducing Brazil.
month to warn the Fed and U.S, safer American govern- to raise rates several more neering soft landings. The
other rate-hiking central ment and corporate bonds times this year to combat re- last one came in the mid-

Morrison defends management of Australia’s ties to Solomons

(AP) — Australian Prime the Pacific island nation less Morrison rejected the center- tions on May 21. needed in terms of that rela-
Minister Scott Morrison than 2,000 kilometers (1,200 left opposition Labor Party’s tionship,” Albanese said.
said Thursday he is fol- miles) from northeastern advice to telephone Sogavare. “The fact that the prime
lowing security officials’ Australia would not be toler- “I can tell you very clearly that minister hasn’t picked up “The government has
advice in managing rela- ated. I am following very carefully the phone to Prime Minister dropped the ball on the Pa-
tions with the Solomon the advice that I get from our Sogavare says an enormous cific right now,” Albanese
Islands after its leader al- “We deplore the continual security intelligence agencies amount ... about what is added.
leged he had been threat- demonstration of lack of trust in how we are responsibly
ened “with invasion.” by the concerned parties, and managing the issues in rela-
tacit warning of military in- tion to this matter,” Morri-
Solomon Islands Prime Min- tervention in Solomon Is- son told reporters. “That is
ister Manasseh Sogavare told lands if their national interest exactly what I’m doing.”
Parliament on Wednesday is undermined in Solomon
that opponents of his new se- Islands,” Sogavare said. Morrison said he had had
curity pact with China have contact with Sogavare “in the
threatened his country and “In other words, we are last few months,” but did not
insulted it. threatened with invasion,” specify when.
Sogavare said.
Sogavare did not name the Opposition leader Anthony
opponents. Both the United On the threat of invasion, Albanese has promised closer
States and Australia have told Morrison said, “Of course, engagement between Aus-
the Solomon Islands that a none of that’s true.” tralia and its South Pacific
Chinese military presence in neighbors if Labor wins elec-