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MANILA — The Asian Development Bank (ADB) on Wednesday cut its 2022 growth forecast for developing Asia, with crippling COVID-19 lockdowns in China, conflict in Ukraine and efforts to combat inflation dragging on the region.

While easing pandemic restrictions had spurred consumer spending and investment in the region, the Philippines-based bank warned of "global headwinds" to the recovery as food and fuel prices soared and central banks hiked interest rates.

As a result, the bank slashed its 2022 growth forecast for developing Asia — which refers to the 46 members of the ADB, stretching from the Cook Islands in the Pacific to Kazakhstan in Central Asia — to 4.3 per cent.

That compares with its April forecast of 5.2 per cent growth. The region grew by 7 per cent in 2021.

ADB chief economist Albert Park warned "risks loom large" for the region's outlook and urged governments to remain "vigilant". 

"A significant downturn in the world economy would severely undermine demand for the region's exports," Park said.

"Stronger-than-expected monetary tightening in advanced economies could lead to financial instability. And growth in the PRC [China] faces challenges from recurrent lockdowns and a weak property sector."

China's growth forecast for 2022 was reduced to 3.3 per cent from 5 per cent, as Beijing pursues a zero-COVID strategy that has devastated the world's second-largest economy.

Chinese officials are under pressure to curb even the smallest virus outbreaks swiftly, ahead of a key political meeting in October where President Xi Jinping is expected to secure an unprecedented third term. 

Officials have imposed targeted lockdowns and travel restrictions, disrupting businesses and forcing millions of people to stay home.

Park said the slowdown was "weighing heavily" on the region's projections. 

Excluding China from the overall forecast, the rest of developing Asia will grow 5.3 per cent.

"For the first time in more than three decades, the rest of developing Asia will grow faster than [China]," the ADB noted.

The bank also raised its inflation forecast to 4.5 per cent from 3.7 per cent, as Russia's invasion of Ukraine and supply chain disruptions drive up food and energy prices.

While monetary policymakers in the region have hiked interest rates, some central banks may need to do more to tame inflation and prevent capital outflows, it said.

PARIS — Central banks worldwide are using aggressive interest rate hikes to lasso galloping inflation, at the risk of pulling down the global economy with it.

The US Federal Reserve and its counterparts in Europe and most emerging economies have been raising rates this year as consumer prices have soared to decades-high levels.

While higher rates aim to tame runaway inflation by slowing economic activity, they can cause a recession if borrowing costs become too steep for businesses and individuals.

"It reminds me what used to happen in the Middle Ages: Bloodletting," Nobel laureate economist Joseph Stiglitz said, referring to the belief at the time that patients could be cured from illnesses by making them bleed.

"When they let out the blood, the patient didn't recover, usually, unless a miracle happened. And so they let out more blood and the patient got sicker and sicker," Stiglitz said.

"I am afraid that central banks will do the same thing now," he warned.

The Federal Reserve will announce its latest monetary policy decision on Wednesday, with investors fearing that after two straight rate increases of 0.75 percentage points, the bank could go for a full point this time.

The Bank of England and its peers in South Africa, Sweden and Switzerland are also expected to continue to tighten their monetary policies at their own meetings this week.

'Transitory' no more 

Consumer prices began to rise due to bottlenecks in supply chains as companies struggled to keep up with a pick-up in demand after economies began to emerge from COVID lockdowns.

After repeatedly describing inflation as "transitory" last year, the Federal Reserve and the European Central Bank (ECB) changed their tune this year as Russia's invasion of Ukraine caused energy and food prices to soar.

Central banks have since raised hikes in an almost synchronised way, raising concerns that their late and aggressive reactions could now do more harm than good.

"Did the economy really need this to slow down?" said Eric Dor, director of economic studies at the IESEG school of management in France.

"Inflation itself caused activity to slow down," Dor said. "Households are losing their purchasing power, wages increases are lower than the inflation rate and [inflation] put a brake on consumption."

ECB President Christine Lagarde acknowledged the possible hit to the economy last week.

"Will it cause a little loss of growth? It's possible," she said on Friday at a conference in Paris. "It is a risk that we have to take after weighing it well."

Earlier this month, US Treasury Secretary Janet Yellen said there is "certainly a risk" of an economic downturn.

But she noted the US job market is "exceptionally strong" with nearly two vacancies for every worker looking for a job.

'Wrong prescription' 

The United States is still haunted by the spectre of inflation that lasted for almost a decade in the 1970s and 1980s.

A World Bank report released last week said a worldwide slowdown accompanied by tighter monetary policies could trigger a global recession next year, with sharp declines in emerging and developing countries in particular.

While economists debate whether the cure for inflation might be worse than the disease, some disagree over the reasons behind the soaring prices.

Stiglitz said demand is not the cause.

"Central banks around the world are pretending or acting as if it was demand that created inflation," he said, noting that higher rates will neither produce more energy nor food or help ease the global supply chain crisis.

"Using a recipe for the wrong diagnosis is getting the wrong prescription," he said, adding that higher rates will raise the cost of making the investments needed to relieve the bottlenecks and raise rents in the United States.

PARIS — Stock markets dropped again on Monday, extending last week's rout as investors brace for another big rate hike by the US Federal Reserve (Fed) that they fear could drag down the global economy.

Wall Street opened lower, with the Dow dropping 0.6 per cent.

The Paris CAC 40 and Frankfurt DAX were down in afternoon trading while Asian indices mostly closed lower. London was closed for the funeral of Queen Elizabeth II. 

"Traders are worried that they are going to hear more hawkish stance from central banks this week" which would "cut economic activity further", AvaTrade analyst Naeem Aslam said.

The Fed will announce its latest monetary policy decision on Wednesday as it seeks to tame decades-high inflation.

With recent data showing US inflation rooted at four-decade highs, investors are increasingly pessimistic about the outlook for the global economy.

Central banks raise interest rates to cool inflation, but higher borrowing costs also slow down economic activity.

Disappointing US inflation figures last week unnerved traders and ramped up bets for a third successive 0.75 percentage-point rise, while some have predicted a whole percentage point move.

Policymakers, including Fed Chairman Jerome Powell, have repeatedly said their ultimate aim is to bring inflation under control, even if that means sending the economy into recession.

"We're expecting a sharp interest rate increase and therefore a clear signal against galloping inflation," said Tim Emden, an independent market analyst.

Patrick O'Hare at Briefing.com said that a good question is why stock markets are still falling when they already took a wallop last week on the prospect of higher interest rates triggering an economic slump.

"The reason being is that the market doesn't have a comforting sense where the end rate will be, how long the end rate will remain the end rate and how low earnings estimates will go," he said.

The Bank of England and its peer in Japan are also holding key meetings this week, with the pound and the yen feeling the pressure from a strong dollar.

Yen under pressure 

Asian equity investors continued the selling on Monday.

Hong Kong closed down one per cent, even after reports that the city's government was considering ending mandatory hotel quarantine for incoming travellers.

Shanghai was also down despite news that megacity Chengdu was ending a two-week COVID-19 lockdown that saw 21 million people affected.

Tokyo was closed for a holiday.

The prospect of more big Fed rate hikes is also keeping the dollar at multidecade highs against its major peers, with the yen feeling most of the pressure as the Bank of Japan (BoJ) refuses to tighten policy.

The Japanese unit last week hit a fresh 24-year low of 144.99 to the dollar, though it has bounced slightly after comments from BoJ officials that signalled they were ready to intervene to provide support.

Oil prices tumbled around 3 per cent despite the news out of Chengdu as demand fears are fuelled by the growing fear of recession around the world.

"The market's growth concerns, meanwhile, are being fed by the inverted yield curve and are manifesting themselves in the commodities market," O'Hare said.

An inverted yield curve is the unusual situation where short-term interest rates are higher than long-term interest rates, and is often a signal of an impending recession.

WASHINGTON — The Federal Reserve (Fed) is poised to unleash another massive interest rate increase this week after the latest data showed a worrying US inflation picture, which confirmed the need for the central bank to continue to act aggressively.

Soaring prices have pushed annual inflation to a 40-year high, inflicting pain on American consumers and businesses, despite the welcome drop in gasoline prices at the pump in recent weeks.

The disappointing consumer price report for August, released last week, showed housing, food and medical costs continued to rise. And when volatile food and energy prices are stripped out, so-called core inflation accelerated.

Families have been struggling with rising prices sparked initially by high demand as the world's largest economy emerged from the pandemic amid supply chain snarls. The situation has been exacerbated by COVID lockdowns in China and surging energy and food prices due to Russia's war in Ukraine.

It is not just current high inflation that concerns policymakers, but the fear that consumers and businesses begin to expect rising prices will become a permanent feature, which could set off a dangerous spiral and a phenomenon called stagflation.

That fear has driven the Fed to front-load its rate hikes, rather than pursuing the more customary course of small, gradual steps over a longer period. 

The US central bank has cranked up the benchmark lending rate four times this year, including two straight three-quarter-point hikes in June and July.

The aim is to raise the cost of borrowing and cool demand — and it is having an impact: Home mortgage rates have now topped 6 per cent for the first time since 2008.

A third massive increase is expected on Wednesday at the conclusion of the Fed's two-day policy meeting. And some people are raising the possibility the US central bank could take an even bigger step.

But concerns are rising that the aggressive action could tip the US economy into recession, which would reverberate around the globe.

"The sizzling-hot, core inflation figures that came out this week for August have upped the pressure on the Federal Reserve to raise rates a full percentage point instead of 0.75 per cent at the upcoming meeting," Diane Swonk, chief economist at KPMG US, said in an analysis.

"This will be one of the hardest and most politically charged of decisions. It marks the Federal Reserve's first move toward an actual recession."

Avoiding a repeat 

of the 1970s 

Fed Chair Jerome Powell has made it clear that a recession is a risk he is willing to take. In fact, it is a risk the central bank must take to avoid an even more dire outcome: A repeat of the damaging, runaway inflation of the 1970s and early 1980s.

"We need to act now forthrightly, strongly as we have been doing and we need to keep at it until the job is done," Powell said in his last public comments before the policy meeting.

Powell's predecessor from the last high-inflation era, Paul Volcker, had to take extreme measures after rising prices became entrenched, resurging and surpassing the peak of the mid-1970s after repeated failed efforts to tame them.

That led to a deep recession and unemployment over 10 per cent.

The Fed's aim is to avoid "the kind of very high social costs" of the Volcker era, and maintain public confidence in the central bank's commitment to fighting inflation.

"The clock is ticking," Powell warned.

While the latest data showed US annual inflation slowed slightly to 8.3 per cent in August — from a peak of 9.1 per cent in June — prices actually accelerated slightly in the month, reflecting widespread price increases.

Central bankers have the luxury of a strong job market, low unemployment and a resilient US consumer, but many economists now see a recession as likely.

Former US Treasury secretary Lawrence Summers is among those warning that joblessness will have to rise to get inflation under control.

He also favours more aggressive Fed action.

"If I had to choose between 100 basis points in September and 50 basis points, I would choose a 100 basis points move to reinforce credibility," Summers said in a recent tweet.

JAKARTA — Indonesia has launched an anti-trust investigation into Google over the tech firm's insistence that its payment system be used for purchases from its app store, authorities said on Thursday, accusing it of unfair business practices.

The US Internet giant has been under legal scrutiny in a number of countries over its stipulation that its billing system be used by all buyers on Google Play.

Authorities in Jakarta said in a statement they suspected "Google has abused its dominant position by imposing conditional sales and discriminatory practices in digital application distribution in Indonesia."

Google Play is the largest app distribution platform in Indonesia, a country of around 270 million people.

Third-party developers offering their apps on Google Play are charged a 15 to 30 per cent service fee, higher than the 5 per cent imposed by other payment systems, according to an initial probe by the nation's anti-trust agency.

"The respective developers cannot refuse the obligation because Google can impose sanctions by removing their applications from the Google Play store and preventing them from making updates to their applications," the agency said.

Google Indonesia said on Friday that it would work with the Indonesian authorities "to demonstrate how Google Play supports developers".

It added that since early this month, it has started a pilot billing system, allowing an alternative payment system alongside the one used on Google Play.

The American multinational has faced a barrage of legal cases in the United States, Europe and Asia based on similar accusations.

Google has also faced claims that it unfairly forced its search engine and Chrome internet browser on phone makers using the Android operating system.

On Wednesday, the European Union's second-highest court ruled that "Google imposed unlawful restrictions on manufacturers of Android mobile devices".

The court upheld the EU's record fine of more than 4 billion euros ($4 billion) against Google

That case was the third of three major cases brought against Google by the EU's competition czar Margrethe Vestager, whose legal challenges were the first worldwide to directly take on Silicon Valley tech giants.

South Korea fined Google nearly $180 million last year for abusing its dominant market position in a similar case regarding the Android system.