Leaders | Economic optimism

The world economy is still in danger

Falling inflation is good news. But it is too early to hail a “soft landing”

Uncle Sam's foot prevents a globe made from gun powder from exploding — Image: Pete Ryan

Jul 19th 2023

Economists are not known for their optimism, but today their good cheer is palpable. Not long ago it seemed that an American recession was inevitable, as the Federal Reserve kept raising interest rates to fight inflation. Other central banks were following suit, their inflation problems made worse by a surging dollar—a particular problem for the emerging markets that borrow and trade using America’s currency. Yet news that America’s headline rate of annual inflation fell to 3% in June has fed hopes that the Fed’s next rate rise, which is expected on July 26th, will be its last and that other central banks might relax, too. Stocks are up, bond yields are down and the greenback is at close to its weakest since the Fed began raising rates.

This article appeared in the Leaders section of the print edition under the headline “Still in danger”