Positive global economic outlook in 2015
world economy and debts
Photo Credit: austinevan via Compfight cc

The world economy is predicted to see continued recovery in the coming 12 months – but that is likely to come with turbulence in part due to the recovery itself.


For example, the International Monetary Fund has forecasted global growth of 3.8%, the highest since 2011 and up from 3.3% in 2014.

Low crude oil prices are one factor helping to drive this growth forecast – you may have noticed lower petrol prices at the pump, and these are one indication of falling wholesale prices per barrel.

However, the economy-boosting effects of low oil prices (which helps to reduce business costs and encourage consumer spending elsewhere) are mitigated on a global scale by the reduced income of oil-producing and exporting countries.

Even so, it’s one factor that should be welcomed by many businesses and consumers alike in 2015, as it should help to keep costs down across the board in the UK.

Meanwhile, turbulence might arise from our transatlantic neighbours, where the US Federal Reserve Bank of New York is considering raising its main interest rate, as it nears its dual goals of 2% inflation and maximum sustainable employment.

Speaking in November, Federal Reserve Bank president William C Dudley said: “For the United States, the start of the normalisation of US monetary policy will be a very welcome development.

“It will indicate that the US economy has made great strides in healing itself from the damage caused by the US housing boom and bust, and the financial crisis.”

An increase in the US main rate would no doubt set our own Monetary Policy Committee thinking, and a rise in the UK base rate might not be far behind – if the MPC raises the base rate in the first half of 2015, it is likely to do so in either February or May.

Following several years of historically low rates, that is likely to cause a certain amount of economic chaos as the pendulum swings in favour of savers, and away from the extra-kind treatment debtors have seen since the onset of the credit crunch some seven or eight years ago.

 

Leave a Reply

Your email address will not be published. Required fields are marked *

REQUEST A FREE CALLBACK