The global economic outlook is mixed, with a number of encouraging signs as well as a number of closely related risks, according to the Bank for International Settlements' (BIS) president Nout Wellink. The risks pertain to conditions in both the financial markets and the real economies, he said. In the US, the main strengths of the economy are rapid underlying productivity growth as well as flexible products and factor markets, Wellink said. These strengths could turn out to be very valuable in the period ahead, he said. But its monetary policy has been approaching the zone where its effectiveness could become less certain, he added.
In the euro area, the main challenge is to increase its growth potential as well as to improve the flexibility of its labour and product markets, Wellink said. By contrast, the EU's monetary policy has both the room as well as the anti-inflation credentials to ease, should it be necessary, he said. Japan, on the other hand, has little ammunition left, he said. Its longer-term fiscal situation has significantly deteriorated and its policy of zero interest rates has not proved as effective as hoped, he added. //www.fxcentre.com