Inflation-Free Growth Is Too Good to Last

Inflation and higher interest rates could cool world markets
By Sam Gale Rosen,  Newser Staff
Posted Jun 6, 2007 2:54 PM CDT
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(Newser) – Globalization and access to low-cost labor has allowed the world economy to grow without high inflation, but this economist's dream may soon end, the Wall Street Journal predicts in a cautionary report. Demand for everything from workers to lumber is increasing, raising prices—and the prospect of higher inflation.

This would lead central banks to pump up interest rates, cooling down world markets. The high demand stems from companies all over the world operating close to capacity. "Markets have gotten used to the idea that the global economy will keep producing downward pressure on prices," says economics professor Ken Rogoff. "But that phase may be ending."