G7 central banks poised to hold borrowing costs amid concerns over prolonged Iran war

G7 central banks hold rates steady as Iran war fuels inflation fears, threatening global economic stability. | Contesto: cronaca

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• G7 central banks poised to hold borrowing costs amid concerns over prolonged Iran war

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The world’s most powerful central banks are poised to hold borrowing costs unchanged this week amid growing concerns over the unfolding inflation shock from the Iran war. In a critical week for the global economy, each of the central banks in the G7 are expected to issue warnings over the risks from the Middle East conflict driving up prices for households and businesses. The decision to keep interest rates on hold reflects a delicate balancing act as policymakers grapple with the dual threats of rising energy costs and slowing growth, with the prolonged war in Iran adding a new layer of uncertainty to an already fragile recovery. The conflict, now entering its third month, has sent shockwaves through global energy markets, pushing oil prices to multiyear highs and stoking fears of a sustained inflationary spiral. Central banks, including the U.S. Federal Reserve, the European Central Bank, and the Bank of Japan, are expected to emphasize that the primary risk to their inflation targets stems from supply-side disruptions linked to the war, rather than domestic demand. This distinction is crucial because it limits the effectiveness of interest rate hikes as a tool to tame price increases, potentially forcing policymakers to tolerate higher inflation for longer than previously anticipated. The implications for households are stark. Higher borrowing costs, even if unchanged this week, have already begun to filter through to mortgage rates, credit card payments, and business loans, squeezing consumer spending and investment. In Europe, where the impact of the Iran war is compounded by existing energy dependencies, the risk of a recession looms large. The Bank of England, for instance, has signaled that it may need to keep rates elevated even as the economy slows, a scenario that could deepen the cost-of-living crisis for millions of British families. For the global economy, the coordinated stance of the G7 central banks underscores the severity of the situation. By holding rates, they aim to avoid adding further pressure to financial markets, which have already been roiled by the conflict. However, this approach carries its own risks: if inflation expectations...

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Categoria: cronaca