Clouds gather over the world economy

Troubles are coming to the world economy not as single spies but in battalions. In setting U.S. monetary policy, the Federal Reserve should take these troubles into account if it wishes to spare the U.S. economy an unnecessarily hard economic landing.

Among the more systemic of the world’s economic troubles are those emanating from China, the world’s second-largest economy and until recently the world’s primary economic growth engine. In response to Chinese President Xi Jinping’s zero-tolerance COVID-19 policy, major Chinese cities such as Shanghai and Beijing have been locked down. At times, that has involved as many as 350 million people unable to work normally.

As a result, the Chinese economy has screeched to an abrupt halt. In the year that ended in the second quarter of this year, China’s economy grew by barely 0.4 percent, which fell well short of the government’s 5.5 percent economic growth target.

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