It could tighten financial conditions, trigger credit stress, and reduce funding for financial institutions, including in the Middle East, North Africa, and Pakistan. In our recently published Regional Economic Outlook for the Middle East and Central Asia, we detail the first region-wide stress test. In a low-inflation environment, central banks can respond to financial stress by cutting interest rates. Troy Matheson is a Senior Economist in the Middle East and Central Asia at the International Monetary Fund (IMF). He contributes to the Global Financial Stability Report and is a member of the IMF’s market surveillance team.
