The World Economy

Extract

Growth in the OECD as a whole has been well below trend in the last three years, and the EU as a whole appears to have experienced a fall in output in 1993. Prospects for 1994 look better, and we are forecasting OECD growth of over 2 per cent in 1994, with only slightly slower growth in the EU as a whole. Inflation has been falling in the EU since 1991, and because these economies are likely to be operating below capacity we are projecting that it will continue to fall, albeit slowly, for the next two years. Inflation in the US will probably reach the end of four years of decline in 1994, and we are forecasting that it will edge up only slowly over the next few years. The Federal Reserve has responded to the prospect of higher inflation, and short rates have been pushed up. Long rates, both in the US and elsewhere have, partly as a consequence, risen sharply in the last few months.