Federal Reserve Chair Jerome Powell kicked off the holiday season with another interest-rate increase. He also lit the fuse for a sell-off in the stock market by telling the world, “We have more work to do,” signaling additional rate hikes in 2023. A year-end “Santa Claus Rally” could still materialize, but so far, the stock market has preferred the playbook of the Grinch.
The global economy in 2023 is expected to be, in a word, nasty.
Citi is predicting “rolling recessions,” the Institute of International Finance expects global growth on a par with 2009, a dreadful year, and the Organization for Economic Cooperation and Development foresees a “very difficult” economic outlook. At the Fed, the latest view of the economy’s future is similarly bleak.
We support the central bank’s tough-minded campaign to tame inflation. Rate hikes and other steps to tighten the money supply make sense given how prices shot up and stayed up over the past year.
Inflation is terrible for American households and those who rely on retirement savings. Getting it under control is essential. And, yes, we recognize the Fed’s battle against rising prices will cost some Americans their jobs and hurt personal finances, as borrowing costs rise for credit cards, mortgages and other loans.
Even so, we were hoping the Fed would be more encouraging. The latest consumer price index report showed inflation in the U.S. to be moderating, at the same time the global economy has been slowing. Surely, the time for harsh medicine is almost over, right? Not according to Powell, who said earlier this month, “We’ve made less progress than expected on inflation.”
The gloomy tone is rubbing off. A worldwide recession is just around the corner, according to BlackRock, the world’s biggest asset manager. The coming downturn is likely to result in severe market volatility and, contrary to what investors have come to expect, the world’s central bankers are unlikely to ride to their rescue. “We don’t see a return to conditions that will sustain a joint bull market in stocks and bonds of the kind we experienced in the prior decade,” BlackRock wrote in its downbeat year-end outlook.
It’s hard to find any positives in these dire forecasts, except for the fact that forecasts are often wrong. Remember, the war in Ukraine shot down the positive outlooks from a year ago, and the pandemic made mincemeat of the bullish forecasts from the end of 2019. Who knows what geopolitical events will affect 2023?
Some households are better equipped to deal with economic stress and uncertainty than others. And the same goes for cities, states and countries as well. All things considered, compared with the rest of the world, Chicago, Illinois and the United States are in a position of strength. We have an enviable capacity to withstand economic turmoil, and even turn it to our advantage.
Let’s keep our advantages in mind as we recognize the challenges facing the neediest among us. Global recessions are tough on rich countries like ours. In poor countries, people die. Sometimes, many people die.
The International Rescue Committee (IRC) recently unveiled its list of countries at the highest risk of humanitarian disasters. No surprise, given Russia’s offensive, Ukraine made the list. But perhaps surprising to some, the war-torn country we hear about every day checks in at No. 10.
At highest risk is Somalia, followed by neighboring Ethiopia — two countries with a combined population of well over 100 million that get little media attention, even as their potential for suffering in 2023 exceeds anywhere else in the world.
These countries typically are low priorities among global decision-makers. Does anyone remember Somalia being mentioned when the Russian navy blockaded Ukraine’s ports, disrupting global food supplies? The East African country had been importing 90% of its wheat from Russia and Ukraine. And there was no national stockpile in Somalia to make up for the lost exports and soaring food prices.
For years, a merciless drought brought on by climate change has undermined the country’s ability to produce its own food. Armed conflict has made matters worse, and aid is lagging far behind the needs of Somalia’s citizens. More than 200,000 Somalis are experiencing “catastrophic” food insecurity, according to the IRC. That means some people are starving to death every day and others are so weak from starvation that common ailments like diarrhea can easily kill them. Children suffer the most.
What to do? The IRC provides a sensible plan for helping Somalia and other crisis spots. It starts with paying attention. After the Fed hiked rates earlier this month, every word of the central bank’s written statement and Powell’s news conference went under the microscope. We paid attention, especially when the stock market tanked in the aftermath.
During this holiday season, let’s pay attention to those who have more to worry about than interest rates on the Mastercard bill or home equity line of credit. Let’s remember those who need help the most and make it a priority to ensure they get it.
