Federal Reserve Chairman Jerome Powell  announces the decision to raise the base interest rate to deal with record-high inflation, during an online press conference in Arlington, March 16, 2022. Photo: Xinhua/VNA

The global commodity supply chain has been disrupted by COVID-19, which is surging in China, a country that accounts for a quarter of global production. Further disruption of sea and air freight routes has resulted from the conflict in Ukraine and resulting fuel price hikes. On Tuesday the International Monetary Fund predicted that the entire global economy will feel the effects of slower growth and faster inflation.

Countries’ responses

A number of countries have recently raised their base interest rate. In the US, the Federal Reserve on Wednesday approved its first interest rate increase in more than three years. After keeping its benchmark interest rate anchored near zero since the beginning of the COVID pandemic, the policymaking Federal Open Market Committee said it will raise rates by a quarter percentage point, or 25 basis points.  The decision was made after price hikes pushed inflation far beyond the FED's long-term target of 2%. In the last two years, the US consumer price index (CPI) has increased 7.9%.

The European Central Bank (ECB) announced late last week that it will end its large bond-buying program earlier than expected and be ready for a rate hike later this year. This is considered an "extreme" but necessary measure that Europe must take to manage rising inflation that carries the risk of recession. Right after the decision was announced, the European financial market saw key stocks fall sharply. By the middle of this week, the EU took another big step, agreeing to subsidize fuel prices for households and support businesses affected by high energy prices. The total budget for this effort is estimated to be hundreds of billions of dollars.

Delegates attend the Meeting of Deputy Finance Ministers and Vice Central Bank Governors of the Asia-Pacific Economic Cooperation (APEC) 2022. Photo: mof.gov.vn

Strong measures to maintain recovery momentum topped the agenda of the APEC meeting of Deputy Finance Ministers and Vice Governors of Central Banks in the past two days. Meanwhile, ASEAN member countries have agreed to find ways to strengthen the supply chain, according to Singapore's Minister of Industry and Trade Gan Kim Yong. At the 28th ASEAN Economic Ministers' Retreat chaired by Cambodia on Wednesday, Minister Gan emphasized the importance of maintaining solidarity and “open, rules-based regional economic integration” as member states struggle to respond to inflationary pressures and economic disruptions.

Sustainable development

Experts say countries’ measures to maintain economic recovery after the COVID hiatus are only temporary. They stress the urgent need to build and promoting sustainable development. Krisada Chinavicharana, Deputy Minister of Finance of Thailand, who chaired the APEC meeting of Deputy Finance Ministers and Vice Governors of Central Banks, said that as the world navigates life with COVID-19, sustainability is an integral part of the recovery, crucial in building a better future for all people.