Prepare for rising tensions between fiscal and monetary policy

The world economy is slowing and many countries risk falling into recession in 2023 WorldAhead

By Henry Curr: Economics editor, The Economisteconomy is slowing and many countries risk falling into recession in 2023. In America sharply higher interest rates, the necessary result of the Federal Reserve’s fight with inflation, threaten to crash the housing market and raise unemployment. Tight money has brought about a strong dollar, which is exporting inflation to emerging markets and making their hard-currency debts harder to service.

Neither the inflation problem nor the energy crisis will be over, however. The Fed faces a rate of underlying inflation that is probably around 4%, in part because labour markets are so tight, with nearly two vacancies for every unemployed worker. Europe will once again need to refill its gas storage in preparation for winter, but with much less supply from Russia than flowed in 2022.

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