Despite growing concerns about China and Greece, the world economy is, at least for now, not in that bad shape. Global inflation seems to be less than many expected, held back by a generally slow but steady outlook for economic growth.
Inflation Under Control?
The way the market looks at the moment, most central banks are looking like they will leave interest rates lower for longer, with some economy’s even considering lowering them. Despite the obvious potential hotspots the only other country causing significant concern is Brazil.
With many of the world’s key economies having almost no consumer price inflation, there are other effects taking place such as rising stock markets. Also many countries are seeing significant increases in real estate values.
So How is America Faring?
Surprisingly, with a presidential election looming, the inflation outlook for the U.S. also remains low. This despite the fact that the official unemployment rate has fallen leading many to wonder why this has not translated into significantly higher salary increase. Market analysts still see very positive prospects for U.S. growth at least until the end of the year now that the financial crisis is beginning to ease.
The European Union has managed to keep away from deflation partly through, some would say cheating, by making 60 billion euros a month in bond purchases through the European Central Bank.
However, with inflation very close to zero and the latest data due this week expected to show just a 0.2 percent rise, it is certainly showing no signs of bumping against the key 2 percent Euro restrictions. Staff at the European Central Bank, are predicting that inflation will average just 1.5 percent next year, possibly rising to 1.8 percent in 2017.
With the U.K. still discussing its exit from the EU now dubbed “BritiEx“, its history of generally higher inflation than its neighbors has also not occurred. According to he latest reports, its inflation predictions show between zero and 0.1 percent.
While this sounds like a rosy picture, if either of the two main issues in Greece and China get worse, the situation could change very rapidly.