Central banks will seek to safeguard financial stability amid growing concerns about their ability to weather the higher interest rate environment, which has resulted in raising fears of a credit crunch, the Swiss Re Institute has stated in a recent report, Reinsurance News reported. Credit has already been tightening in the U.S. and EU, just as smaller banks are experiencing renewed pressure on assets. This potential credit crunch would involve a sudden and sharp restriction on lending to businesses and households, which could cause serious damage to the real economy.

Core inflation in the eurozone hit a record in March, a setback for central bankers whose rapid interest-rate rises have exacerbated financial sector strains and caused pains in part of the bloc’s economy, the Wall Street Journal reported. The fresh data increases the likelihood that the European Central Bank will raise its key rate again in May. It could also encourage governments to explore alternative ways to cool prices rises by targeting inflationary increases in profits.