Feb will come under pressure to find way to create jobs in election year

To the editor,

Global monetary policy remains accommodative. There is a perception among economists that a normalization cycle has now begun. That said the Federal Reserve is unlikely to boost its benchmark rate until the second half of 2012. It will be an election year after all.

The Fed chairman has begun to warn more explicitly about the dangers of rising inflation. Federal Reserve officials want to see more improvement in the unemployment rate before they consider a rate increase. They will also want to see how the economy performs without the high levels of monetary stimulus. If the jobless rate remains above 8-percent in 2012, and it will, the Fed will come under pressure to find ways to create jobs. It will be an election year after all.

The forecast for the global economy as a whole assumes that industrial production in emerging markets levels off after the gyrations of the last three years. Growth in the non-Organization for Economic Cooperation and Development will slow in 2011 as the impact of fiscal stimulus and the inventory cycle fades.

Growth there will remain strong at about 6.5-percent at purchasing power parity rates. This will help countries such as Germany and Japan, which depend on rising export penetration into the emerging world to drive growth. It will also help highly indebted economies such as the U.S. and the U.K., where raising export growth is vital to help offset the weakness of domestic demand.

Marc Abear

Meredith