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Across The Globe, Inflation Seems An Endangered Species


Economic Trends

ACROSS THE GLOBE, INFLATION SEEMS AN ENDANGERED SPECIES

While most industrial economies outside the U.S. appear to be flirting with recession, they share at least one singular achievement: a remarkable deceleration in inflation. The latest tally in the Conference Board's International Economic Scoreboard, which tracks 11 industrial nations (including the U.S.), reports that the average inflation rate is now down to 2.6%, with five of the countries registering rates below 2% and none of the others above 5%.

Nations with inflation under 2% include Canada, Japan, Australia, New Zealand, and Taiwan. And reports from France, Sweden, Denmark, and Norway all show inflation rates below 2.5%.

The catch in this positive picture is that many nations have been raising interest rates to defend their currencies. And the coincidence of these actions with low inflation has pushed real interest rates to enormously high levels. Economist Rosanne M. Cahn of First Boston Corp. calculates that real short-term interest rates in 12 European countries now average 8%. "Such high rates are ultimately unsustainable in the face of weakening economies," says Cahn.GENE KORETZ


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