The turmoil in global markets since the beginning of the year is not, in our view, a sign that the world economy is heading for a recession, but the fall in oil prices will have a knock-on effect on inflation. While not a “game-changer”, it has reinforced the case for monetary policy in most advanced economies to remain loose. But the implications for emerging economies are more mixed. As the currencies of many countries have weakened, central banks have come under growing pressure to tighten monetary policy.
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