The Federal Reserve’s decision to raise interest rates last month has alarmed U.S. markets about a looming recession, but as a reminder of the global nature of the economy, the higher interest rates are alarming markets overseas.
In this week’s appearance by Guy Williams on the Newell Normand show, the CEO of Gulf Coast Bank Trust explained why the higher interest rates in the U.S. are causing concern for economies in European countries like the United Kingdom.
“What’s happening is as the interest rate goes up, the dollar is becoming stronger and it’s causing serious inflation in a lot of European countries, particularly the U.K.,” Williams told Normand this week.
In addition to rising inflation, Williams said the U.K. is also struggling manage retirement payments to many of its citizens. Many retirees in the U.K. have what are known as defined pension benefit plans, meaning they get a certain amount of money when they retire. Williams said economic conditions are making it very difficult for the British government to make good on those plans.
It’s just one example of the multifaceted set of challenges for foreign governments. Williams said China’s government is hurting itself by sticking to its zero COVID policy and shutting down cities when there’s an outbreak.
Considering how wide and deep inflation has spread, the United Nations is calling on the Fed and other central banks to put a freeze on any more interest rate hikes because of fears it could cause economic disaster across the global market.
Williams said the U.N.’s concerns are legitimate, but painless options to contain inflation and stabilize economies are in short supply.
“The challenge right now is we’re looking at inflation which is tax on everybody, from the poorest to the richest, and that’s politically unpopular. The dilemma for governments is can we raise taxes right now?
The economy is about to slow down worldwide. We’re already seeing lots of signs of slow down, and then cutting spending is never popular in D.C. or any government. Really a tough situation with really no good options at the moment,” said Williams.
Listen to the full conversation between Williams and Normand including what could be done domestically to eventually bring about more affordable energy.
