Banking regulators across the world may start reversing rate hikes during 2023 amid signs of a global slowdown, public lender State Bank of India (SBI) has said in a recent report.
“With the prospect of a global slowdown, central banks in different countries may unwind the rates as inflation comes off the boil and slowdown starts to bite,” India’s largest bank said in its report.
According to the report, higher cost of capital and lower operating margins impact growth as well as competitive landscape, favouring established market players than the new entrants.
“This is in complete contrast to the post-global financial crisis in 2008, when all central banks had cut rates in unison, but central banks in respective countries decided to take an exit from easy monetary policy separately, India included,” SBI said.
In India, banking regulator RBI increased its benchmark lending rate by a cumulative 225 basis points in 2022 to bring it to 6.25% from 4% in 2021.
“As central banks across the world simultaneously hike interest rates in response to inflation, the world may be edging toward a global recession in 2023, and a string of financial crises in emerging markets and developing economies that would do them lasting harm, a September 2022 study by the World Bank warned earlier.
“Central banks around the world have been raising interest rates this year (2022) with a degree of synchronicity not seen over the past five decades—a trend that is likely to continue well into next year,” the report added.
