(Reuters) – Global growth prospects have dimmed slightly, with the United States and Britain leading industrialized economies that are not generating much inflation even after years of aggressive monetary stimulus, Reuters polls found.
While China’s economic growth broadly stabilized in the latest quarter, the threat of a sharp correction in its overextended property market and any aftershocks remains the biggest danger for the world economy.
When your population is 1.4 billion and you are in the midst of an unprecedented government and credit-fuelled expansion in infrastructure on your way to developed economy status, there are plenty of things that may get overlooked.
Both Bank of England Governor Mark Carney and Federal Reserve Chair Janet Yellen have dropped many hints in speeches and public policy statements over the past several months that wage inflation likely will play an important role in any decision to raise interest rates.
Companies have finally begun taking on staff in consistently greater numbers, half a decade after the end of a deep recession brought on by one of the most punishing financial crises in history.
The euro zone is not deflating, it’s just at risk of a too-prolonged period of low inflation, says European Central Bank President Mario Draghi.
Judging by recent evidence, it might be very prolonged, which is bad news for an economy struggling to shift out of low gear.
Bank of England Governor Mark Carney shocked markets last week, saying interest rates could rise sooner than expected.
At first glance, the latest UK inflation data suggest they might not.
Inflation has nearly halved to 1.5 percent in May from 2.9 percent last June. And wage inflation is much lower.
“It could happen sooner than markets currently expect.”
That was the bomb of a headline Bank of England Mark Carney dropped in a speech on Thursday that suggested a significant change in tone at the bank.
So far, Carney has seemed comfortable with keeping rates at a record low of 0.5 percent for another year. That has been the forward guidance markets have been following.
Results are in from the latest Reuters poll on Canada’s rampant property market from economists and market analysts, and the message is everything’s fine.
Prices will rise gradually over the next few years and there is very little risk of a crash.
Faith that the U.S. economy may finally be at a turning point for the better appears to be on the rise, as many ramp up expectations for a better Q2 and second half of the year.
But that does not mean that interest rates are likely to rise any sooner.
Goldman Sachs’s Jan Hatzius, one of the most dovish economists on when the Federal Reserve will eventually raise rates, has lifted his growth outlook but stuck to the view that the first interest rate rise off the near-zero floor won’t come for nearly two years, in early 2016.
The European Central Bank cut rates as low as they will go on Thursday and announced another round of cheap cash for banks, hoping the euro, which has helped knock down inflation in the fragile euro zone economy, will fall.