Prospects Not Good for Major Pickup in Global Economy

The world economy might have another year similar to 2019, with a modest growth for developed economies offsetting the persistent weakness in other areas but generating little inflation and maintaining the interest rates very low.

The long-awaited increase by the Federal Reserve in interest rates from their near zero has showed confidence in the largest economy in the world, but its rival China continues to struggle to find a foothold with cuts in rates.

Although certain countries, like Brazil, have for the most part inflation, troubles that are home grown, the Feds first rate hike post the crisis will unlikely be the cure for what is ailing the remainder of the world.

With the exchange rates the main topic of policy debate in a number of countries, what happened to the U.S. dollar will however matter a great deal.

The big question said one economist is whether the economy in the U.S. is robust enough not to just sustain the recovery in the U.S. but also lift world trade as well as global growth enough to allow external deflationary pressure that were weighing on inflation in the U.S. to wane, he added.

Along with a sudden downturn in global trade volume and continuing fall in the prices of commodities, the rise in the dollar this year brought industrial growth in the U.S. to almost a standstill, which kept the lid on pressures of inflation from abroad.

According to another analyst, the other extreme is the U.S. through its strong dollar will simply be the latest victim of deflationary pass the parcel that has plagued the world economy for over a decade. Thus, it will find itself following the rest of the developed market central banks that raised rates but found out soon their course had to be reversed.

A poll of economists by an international news agency on Friday said the Fed would hike its rates once again during March, but likely will not move as quickly in 2016 as has been suggested by policymakers.

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