The world economy is still in danger

Economistsare 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 . Other central banks were following suit, their inflation problems made worse by —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 .The surge of hope is all the more unusual because the is slowing down. On July 17th China reported that its economy grew by a mere 0.8% in the second quarter compared with the prior three months, even though many had expected a boom after the government abandoned its “” policy in December. Global manufacturing has suffered as consumers came out of lockdowns and began eating out more and buying less home-office equipment. And, although America grew strongly in the first half of the year, most forecasters expect the economy soon to slow.