In the global context, inflation and the way of growth revolve around the economic measures of the United States. In general, the global economy is expected to slow down this year and then improve next year.
Of course, forecasts indicate that growth will remain low due to the fight against inflation and the war in Ukraine. However, the outlook is less damaging than in October 2022, and there could be a positive turning point.
We all hope for improvements, but the economy has become very unpredictable. It is a statement that is difficult to interpret because, in an age of much information, this can sometimes play against it.
The challenge of the North American economy in the face of the world panorama
Given the inflation suffered by the United States, the Federal Reserve has taken measures to try to control it. Below is a set of actions that generates a high risk of recession and instability in the global economy:
- Economic growth. If the policies are effective, they can boost the path of development, which in turn can have a positive effect on job creation and investment.
- Inflation. If the Federal Reserve raises interest rates, it may lower inflation, but it may also slow economic growth. On the other hand, if monetary policy is too loose, it can increase inflation.
- Exchange rate. The dollar’s value may rise if the US economy is strong, hurting exports. If the dollar weakens, exports may increase, increasing inflation.
- International Trade. Protectionist policies can damage trade relations with other countries and reduce international trade. On the other hand, free trade policies can stimulate international trade and economic integration.
- Economic inequality. If policies are favorable to big corporations, it can increase economic inequality, while policies that benefit the lower and middle class can reduce it.
Given this, the current dilemma of the Federal Reserve is between price stability and employment. A dilemma usually focuses on internal terms but could have significant and unpredictable spillover effects on the world.
Economic measures of the United States so far in 2023
In general, the anti-inflation measures in the United States have been predictable. However, interest rates are expected to fall, a reduction in GDP and a slight increase in unemployment.
With the tightening of monetary policy and the end of the COVID-19 programs, the economy is expected to slow down. Thus, the Federal Reserve seeks to reduce underlying personal consumption spending inflation to 2 percent by the end of 2023.
Goldman Sachs believes that the United States can still get a “soft landing” with inflation slowing to between 5 and 3 percent. In addition, they forecast an increase of half a percentage point in unemployment, a quite encouraging variation given the current situation.