World economy week ahead getting used to the \\\'new mediocre\\\'

Evaporating inflation and slowing growth have put financial markets into such a spin that they could inflict further damage on the world economy. Until a dramatic selloff, exuberant markets had raced well ahead of the economies that underpin them, partly because the US Federal Reserve and other central banks flooded the financial system with new money. With the Fed set to turn off its money taps at the end of this month, investors appear to have woken up to poor growth prospects in much of the world, something International Monetary Fund chief Christine Lagarde has termed a ‘new mediocre’. It's not all doom and gloom. The outlook for the world’s largest economy has not suddenly taken a turn for the worse. And a 25 per cent plunge in the price of oil since June should put more money in the pockets of companies and households.’ US momentum has softened a little but we expect growth to remain solidly above trend. At the same time, the drop in oil prices is as much a reflection of supply as demand factors,’ economists at Goldman Sachs said in a note, according to Reuters.