Abstract
• Growth in global output will slacken from 4.7 per cent in 2000 to 4.1 per cent in 2001 as the mon etary tightening of the past eighteen months takes full effect and economies adjust to the oil price shock.
• If the correction in American equity prices is sustained, the US Federal Reserve will only have to raise interest rates from 6.5 to 6.75 per cent in order to contain inflationary pressures in the US. • The European Central Bank will need to raise interest rates to 5.25 per cent by the middle of 2001 in order to keep inflation in the Euro Area under control.
• The modest Japanese recovery will continue, with GDP growth of 2.1 per cent in 2001, the best performance for five years.
• The rise in the oil price will have a much more muted effect on output and inflation than previous shocks.
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