The world economy needs a healthy measure of growth from developing countries to counter-balance anemic growth from developed countries. Nevertheless healthy GDP growth seems to be evading nations all around. The OECD has already hinted that the world is stuck in a low growth conundrum that extraordinary monetary policy has not been able to extricate it from. Judging by the data, Fed rate hikes should be more than a month away; economic malaise will hinder inflation.
The US will likely keep undershooting its 2% inflation target for a few months to come. Global economic woes will keep on pulling inflation down, since demand for products remains relatively flat, and demand for raw materials, especially oil, remains below available supply. With WTI barely touching the $50 USD mark just to retreat repeatedly after doing so, there is little possibility that consumer price indexes will budge.
Ironically, the effect that a sluggish global economy has on the markets, seems to be similar to the one that a Fed rate hike would have as well. Markets will continue dipping as a result of dim prospects for future economic growth, just like they did with a looming, speculative Fed rate hike. The only difference this time is that the markets are reacting to data, instead of rumors. This at least is a bright spot for traders desperate to see their conclusions from their technical and fundamental analysis, finally bear fruit.
