WORLD OUTLOOK

After a period of optimism over world recovery the pendulum has swung to concern that recovery may be faltering. We see little new evidence to support this view. Our central assessment remains that this concern is overdone and that, although the repercussions of the Mexican crisis may dampen growth prospects temporarily, the outlook is for sustained growth combined with continued low inflation. The underlying pace of recovery is still sufficiently fast to warrant further monetary tightening in most of the industrial economies.