There are people here that say that they studied economics, but nevertheless seem not to have any clue about how centrals banks operate to tame inflation,
They increase interest rates with the aim of reducing private consumption and private investment, the two main components of the GDP.
Their action quite often tends to lead to what is called a central bank induced recession, that is, a relatively short lived recession because they can very easily reverse their polices by bringing down interest rates.
GDP Formula - How to Calculate GDP, Guide and Examples (corporatefinanceinstitute.com)
Major central banks, including the RBA, have been working hard through 2022 to get on top of ‘todays problem’ high and rising inflation. Global monetary policy has tightened significantly, with more tightening expected into early 2023. The ongoing exception to this trend is expected to be the BoJ and PBoC.But, during H1 2023 we expect some of the major central banks, including both the US Fed and RBA, to end their tightening cycles. Indeed, before the end of 2023 we expect to see the start of a monetary policy easing cycle in both the US and Australia, as central banks pivot towards ‘tomorrows problem’ – a significant slowdown in economic growth. Our base case envisages a global recession in 2023 – the first central bank induced global recession for a number of decades.
2023 Global & Australian Outlook: The pivot from ‘today’ to ‘tomorrow’ (commbank.com.au)
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There are people here that say that they studied economics, but...
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