Inflation and delayed rate high risks economic instability and rise in protectionism

[David J. Lynch, Yale University, MA in international relations, BA in government, Washington Post Financial writer covering trade and globalization, 6-11-24, Washington Post, “Surprising U.S. economy is powering better global outlook, World Bank says,” https://www.washingtonpost.com/business/2024/06/11/world-bank-us-economy/, accessed: 7-14-24, ES]

Global inflation should ease to 3.5 percent this year, before dropping to 2.9 percent next year. But the decline is proving more gradual than the bank anticipated. And any deterioration that causes monetary authorities to delay cuts in borrowing costs could strip 0.3 percentage points from the forecast growth rates.

“This is a major risk confronting the global economy — interest rates remaining higher for longer and an already weak growth outlook becoming weaker,” Gill said.

Bank officials also flagged global trade — which is on course this year to complete its weakest half-decade since the 1990s — as a concern. Trading nations in 2024 have implemented more than 700 restrictions on merchandise trade and nearly 160 barriers to services trade.

“Trade restrictive measures have skyrocketed. They have more than doubled since the pre-pandemic period,” Gill said.

Rising protectionism risks becoming a drag on the global economy’s already modest pace of growth. Popular support in many countries for tariffs on imported goods and industrial subsidies that favor domestic production could further constrict trade flows that are already under pressure from the U.S.-China rivalry and other geopolitical risks.