Correct the following statements: Statement-I: In the post-pandemic recent past, many Central Banks

Question

Correct the following statements: Statement-I: In the post-pandemic recent past, many Central Banks worldwide had carried out interest rate hikes. Statement-II: Central Banks generally assume that they have the ability to counteract the rising consumer prices via monetary policy means. Which one of the following is correct in respect of the above statements?

Accepted Answer

A new study by the World Bank has revealed that with the central banks across the world simultaneously hiking 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.Central banks around the world have been raising interest rates this year with a degree of synchronicity not seen over the past five decades—a trend that is likely to continue well into next year.A central bank with a high degree of credibility firmly anchors expectations of price stability. The monetary policy transmission mechanism is characterised by long, variable and uncertain time lags. Thus it is difficult to predict the precise effect of monetary policy actions on the economy and price level.Hence Central Banks generally assume that they have the ability to counteract the rising consumer prices via increasing interest rates. Hence both statements are correct and statement II is the correct explanation of statement I.