Rate hikes will lead to fin stress, says WB economist

The synchronised monetary tightening by central banks would lead to financial stress and regulators would need to be watchful, said World Bank (WB) economist Ayhan Kose.

Kose said that while central banks were rightly targeting inflation since without price stability there could not be macroeconomic stability, they need to make sure they take into account the implication of their policies. "In an environment where everyone is increasing interest rates, the likelihood of financial stress also increases. So, the regulatory bodies have to be on top of the issues relating to balance sheet mismatches," he said.