The international environment

• This article discusses developments in the global economy since the November 1999 Quarterly Bulletin.
  
  
• World activity continued to expand at a faster-than-expected rate in the second half of 1999. Prospects for 2000 have improved and forecasts for GDP growth have recently been revised upwards.
  
  
• The US economy continued to grow strongly, driven primarily by domestic demand. The Federal funds target rate was increased by ¼% to 5½% in mid-November, and by a further ¼% to 5¾% in early February.
  
  
• Activity in the euro area picked up in Q3 and appears to have remained robust in Q4. Conditions in the major euro-area economies improved, partly due to stronger export demand. The ECB raised its main refinancing rate by ½% in early November and by a further ¼% to 3¼% in early February.
  
  
• The Japanese economy has started to improve. That reflects a supportive policy stance as wellas an increase in exports. However, the outlook for private consumption and investment remains weak.
  
  
• The recovery in emerging market economies in 1999 was stronger than expected. Growth in Asia is expected to be stronger than in Latin America.
  
  
• Oil prices continued to rise, but growth in non-oil commodities prices was more muted. Although raw materials prices have risen in response to this, inflationary pressures further along the supply chain have been more subdued.

The international environment