Another important risk that the world economy is facing is the substantial increase in international oil prices. Brent crude oil prices have increased from levels around $ per barrel in May 2003 to almost $ per barrel in May 2004.
Nobody would have imagined that central banks could affect long-term interest rates and that the huge pool of liquidity wouldn’t stoke inflation. This assumption is being fundamentally challenged. It goes well beyond the monetary aspect. We are in a period where theory is lagging behind reality, as has already happened in the past. In recent years, monetary economics has progressed significantly.