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Central Banks Step Into Potential Policy Error Territory

Hawkish stances risk overtightening and causing recession

Arif Husain, Head of International Fixed Income and Chief Investment Officer, Fixed Income
T. Rowe Price,  July 2023

Could we be entering the zone of a global monetary policy mistake? Recent hawkish stances taken by some major developed market central banks make this a valid question. There is now a meaningful risk that these central banks could overtighten in their quest to quell inflation and help push the global economy into recession as well as induce a financial market recession. China’s central bank, on the other hand, may be making a different type of policy error by not easing policy enough to support the country’s economy.

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