One of the consequences of the Federal Reserve's aggressive interest rate policy is that it pushes the exchange rate up for the US dollar, and in addition to making the US less competitive on international markets, it forces other nations' central banks to raise their interest rates to protect their currency.
If their currency falls shortly, then their largely dollar denominated debt would become unaffordable, and the cost of imported goods would rise, increasing inflation, but it also has the effect of slamming the brakes on their economies:
Central banks around the world moved Thursday to combat the effects of a soaring dollar and rising inflation, joining the Federal Reserve in risking a recession to rein in climbing prices.
In a flurry of central-bank meetings from Norway to South Africa, many raised rates by larger-than-expected margins in a day that analysts at ING billed as “Super Thursday.”
The Bank of England raised its key interest rate for the seventh consecutive time on Thursday. Before the news came out, the British pound briefly touched its lowest point in 37 years against the dollar before recovering some of its losses to reach $1.13.
Even some countries that didn’t move rates—the Bank of Japan left its policy rate at its previous low level—took other action to ease the growing inflation pressure.
This has gone from belt-tightening to economic contagion in the space of a few months.
We are going to be driven into a world-wide recession by the fixation of the central banks.
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