The improving world economy means rising employment and pay – and thus rising inflation and interest rates
Christine Lagarde had good news to tell when she turned up in Davos three weeks ago to announce the International Monetary Fund’s latest economic forecasts. The global economy was doing better than expected pretty much everywhere, the IMF’s managing director said.
There was, though, another message, a warning not to get too carried away about a recovery that had left out large numbers of people and was not based on particularly solid foundations. “There is also significant uncertainty in the year ahead,” Lagarde said. “The long period of low interest rates has led to a buildup of potentially serious financial sector vulnerabilities.”
Why are stock markets falling?
Inflation is when prices rise. Deflation is the opposite – price decreases over time – but inflation is far more common.