Add monetary policy to the list of ways in which America’s economy stands out. Central banks in Canada, Sweden and the euro zone all recently began cutting interest rates. Yet the Federal Reserve on June 12th again postponed its plans for monetary loosening. Even though rates in America have risen higher than in other big rich countries and inflation is falling, the median Fed rate-setter expects a cut of just one quarter of a percentage point this year. Some monetary divergence is the natural consequence of America’s stronger growth. But what is increasingly striking about America’s relative vigour is how immune it appears to be to the threat of political dysfunction and fiscal frailty—factors that weigh heavily in the rest of the world.
According to the European Central Bank’s latest projections, the euro zone’s economy will grow by 0.9% in 2024. A real-time estimate by the Federal Reserve Bank of Atlanta suggests that America’s is currently growing at more than three times that pace. China is struggling with a property crisis and the threat of deflation; Japan has been defending its weak currency and Britain has become synonymous with dreadful productivity. A combination of strong growth and a strong dollar means that America’s share of global GDP at market exchange rates, which should fall as others catch up to the world’s biggest economy, is instead growing.
