A Cautionary Tale

The latest quarterly update from the IMF on the outlook for the world economy published last week saw little change to its forecasts from those issued in January and last October.

Storm Clouds Gathering

• It is a tricky balancing act for central banks in trying to engineer a slowdown in economic activity to lower inflation, by tightening monetary policy, without going too far in hiking rates, and having an even greater contractionary impact on demand.

• Economic data have generally surprised to the upside in first quarter, helped by easing inflation. However, possible credit crunch and tighter lending standards new risk to activity