Before the global financial and economic crisis erupted central bankers were considered if not the masters of the universe at least the masters of the world of finance. However, serious problems have emerged with regard to both the theoretical underpinnings of monetary policy as well as to its implementation. As the roles of the financial sector and asset bubbles had been neglected, the problems contributed to the development of the global financial crisis. <p>Even though our forecast for German GDP growth in 2013 has hugged the lower end of the consensus range for quite a while, we have slightly reduced our estimate to 0.1% (from 0.3%). The main reasons for doing so are the below-forecast Q1 GDP reading (0.1% qoq) and the downward revision for 2012, which additionally depressed the starting level for 2013. Despite the downward revision to German GDP we now expect private consumption to pick up by 1%. The driving factors are the high employment level, falling inflation and relatively robust wage settlements. [more]

As year end and the policy precipice in the US draw near, we find the global economy trudging along at significantly below trend, held back by uncertainty about US fiscal policy prospects and a European economy still mired in mild recession. Emerging markets are still pushing things along, but they too are not invulnerable to a policy misstep at this juncture... [more]

...Forecast tables

GDP	(% yoy)
	2011	2012F	2013F
United States	1.8	2.2	2.2
Japan	-0.5	1.9	2.1
Euroland	1.5	-0.6	-0.6
Germany	3.0	0.7	0.1
France	2.0	0.0	-0.6
Italy	0.5	-2.4	-1.8
United Kingdom	1.0	0.3	0.5
Australia	2.4	3.6	2.3
Russia	4.3	3.4	3.1
China	9.3	7.8	7.9
Canada	2.4	1.8	2.1
India	7.5	4.1	4.9
Brazil	2.7	0.9	2.4

 

In January the Japanese central bank raised its inflation target from 1% to 2%. At his first central bank meeting in April, the new governor surprise BoJ watchers with considerably more aggressive monetary easing than had been expected. This change of monetary regime is seen as a risk for other export nations – notably Germany. However, such concern is only partly justified for Germany. [more]