Global Recession Fears Grow; the US, Mexico Face StagflationBy Emilio Aristegui | Thu, 09/22/2022 - 10:00
The World Bank and BlackRock indicated that many countries across the world, including Mexico and the US, could face a stagflation following the growing inflation and economic slowdown.
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Carlos Del Rio, CEO, Credimotion, explains that most people believe that buying a used car via a pre-owned floor of a brand-name dealership represents the safest option. People are attracted to high levels of guarantees, which they often associate with buying a car from automotive groups.
“The dark side of this is that people think that the prices are highly inflated compared to other alternatives. At the same time, if you want to sell a car to them, hold on because they will offer you well below the market price. The final plus they offer is that you are dealing with a serious, properly constituted company that is not going to disappear overnight,” said Del Rio.
If the US Federal Reserve (Fed) continues raising rates, Mexico could be severely affected due to its proximity and close relationship with the US. On Wednesday, the Fed hiked its rates by 75 base points. Following previous rate hikes, Mexico’s Central Bank (Banxico) increased its own rates to follow the Fed’s footsteps, as both central banks seek to avoid a recession.
“I think inflation is a choice and it is one that the Federal Reserve has to make… keeping in mind it is easier to control inflation if you have more competitive pressures on workers and some attenuations for those pressures,” said LawrenceSummers, Harvard economist and former US Treasury Secretary.
Global economies are facing the risk of a recession, central banks continued to rise interest rates in response to severe inflationary shocks around the world.
“Global growth is slowing sharply, and a further slowdown is likely as more countries enter a recession. I am deeply concerned that these trends will persist, with lasting consequences that are devastating for people in emerging markets and developing economies,” said David Malpass, President, World Bank Group.
Mexico’s inflation crisis during the past 30 years have been preceded by palpable indicators in the market: an inefficient exchange rate regime, poor financial or outdated regulations, excess in spending with weak tax collection and bad investment decisions for defense are some indicators of a nearby crisis. Today, all of these are presented in Mexico, wrote Joseph Merullo, CEO, Arrenda, in MBN.