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Feb 25, 201503:33 PMOpen Mic

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Market and economic update: The markets watch Greece as it attempts to tackle its debt

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Politics and monetary policies remain important regarding the path of global economic activity. Last week, Greece reached an agreement with European ministers to delay the implementation of new austerity measures for four months. Greek government officials are attempting to reduce austerity measures, as per their election promises.

The European Central Bank, eurozone, and International Monetary Fund creditors are ultimately concerned that Greece will be able to begin paying interest on its debt and reduce its government debt burden, which currently stands at 175% of gross domestic product. The market has priced in little risk of Greece exiting the eurozone. From an economic impact perspective, this appears appropriate, but the market dislocation of a Greek default or ultimately the exit of Greece from the eurozone will temporarily stress markets.

Economic data over the past week indicate inflation continues to slow around the world, and generally, growth within the developed world remains solid and may even be improving. Wholesale prices in the United States slipped 0.8% in January and 0.1% if we exclude food and energy prices. Wholesale prices in India, which have struggled with significant inflation pressures, have fallen 0.4% over the past year, indicating price weakness seems to be a global phenomenon.

(Continued)

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