The
International Monetary Fund (IMF) is raising its forecast
for world economic growth this year and has predicted
that inflation will also rise.
Yields
on 10-year Treasury notes climbed to the highest in five
years on June 12 on speculation the pace of economic growth
will push up borrowing costs.
The
European Central Bank, the Bank of Japan, the People''s
Bank of China and the Bank of England have all indicated
that further rate increases may be in the pipeline this
year, while economists at Merrill Lynch and Goldman Sachs
now expect the US Federal Reserve to leave rates at a
six-year high rather than cut them.
2007
will mark the fifth consecutive year of world growth in
excess of 4 per cent - the longest streak of sustained
expansion in three decades.
The
IMF in April predicted global growth of 4.9 per cent this
year and next after 5.4 per cent in 2006. The fund currently
forecasts growth in the US, the world''s largest economy,
to slow to 2.2 per cent this year from 3.3 per cent in
2006 amid a slump in its housing market led by defaulting
sub-prime mortgage borrowers.
The
world''s major central banks have increased borrowing costs
over the past year to contain inflation. Policy makers
are concerned that sustained global growth will fuel wage
and price increases as companies operate at full capacity
and unemployment drops.
China''s
central bank officials said the bank may raise rates for
a third time this year to curb inflation and take the
steam out of a surging stock market.
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