August 09
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World Bank Chief Economist Carmen Reinhart is skeptical that the US economy and the global economy can avoid recession given soaring inflation, soaring interest rates and slowing growth in China.

It has historically been a challenge to bring inflation down and at the same time plan for a soft landing, she said, and recession risks are clearly a hot topic.

What worries everyone is that all the risks are stacking to the downside, Reinhart told Reuters, citing a series of adverse shocks and moves by the Federal Reserve to raise interest rates after a decade and a half of ultra-low prices and negative rates.

The 2008-2009 global financial crisis mostly affected a dozen advanced economies, and China was a big growth engine at the time, but the crisis is much broader and China's growth is no longer in double digits, she said.

The World Bank this month cut its global growth forecast by almost a third to 2.9% for 2022, warning that the war in Ukraine has exacerbated the damage from the COVID-19 pandemic, with many countries now facing recession.

It says global growth could fall to 2.1% in 2022 and 1.5% in 2023, leading to near-zero per capita growth if downside risks materialize.

The Biden administration was not alone in underestimating the degree of inflationary risk, she said, and the Fed, International Monetary Fund and others shared this view, although the World Bank had previously called it a real risk.

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