Similarly, Germany's recovery is being threatened by the strength of the deutschemark. The Mexican peso crisis has affected many economics. Britain and Italy are dealing with the inflationary fallout of their devalued currencies, while France's defence of the franc has limited the interest rate relief necessary to reach President Jacques Chirac's job creation goals. Canada faces rising inflation and a weak currency just when interest rate relief is needed most, complicating the Bank of Canada's attempts to lower rates. Ordinarily, recessions don't occur until demand over-expands and inflation accelerates.
Recession remains more possible than probable in most forecasts.
Any number of shocks could push rates up. And indeed, many economic data do suggest the British economy has ground to a halt. Real manufacturing production has declined slightly in the last six months and real retail sales have barely grown. But, Magnux adds, there is considerable suspicion about the accuracy of the official statistics because surveys of business confidence suggest things aren't nearly so bad. A weak economy jives with the chancellor of the exchequer's decision to keep interest rates stable for the present.