The international environment

• Economic growth continued to be strong in the second and third quarters in the United States. In Western Europe, activity strengthened in the second quarter; Japan’s output fell.
• In the United States, inflation has risen from its low in the second quarter. In Japan, western Germany and France, the outlook is for low inflation.
• Official interest rates increased further in the United States in the third quarter. And for the first time in this cycle, official rates rose in a number of other OECD countries.
• Current account imbalances have begun to fall in some of the major economies. Budget deficits are still high, but higher growth may reduce the cyclical parts of deficits and some countries have tightened fiscal policy.

The international environment