Much of the industrialized world is shifting its economic foot from stepping on the accelerator to tapping on the brakes.
While high energy prices grab headlines, another economic trend - higher interest rates - will soon affect millions of people and perhaps the vibrancy of nations.
Sharply rising economic growth in several countries is forcing central banks to consider either ratcheting up interest rates or reining in money supplies to make sure inflation doesn't get out of hand. That will affect the cost of everything from home mortgages to business loans.
• The Bank of England Thursday hiked its key interest rate to 4.5 percent, the fourth increase in eight months. British economists show rising concern about inflation, especially in house prices.
• Alan Greenspan and his band of merry central bankers are expected to hike American short-term interest rates by 0.25 percentage points at the end of this month - the same amount as their colleagues in London.
• China's economy has been growing so fast that the government has boosted rates twice in the past three months.
• This week, the Royal Bank of New Zealand raised interest rates a quarter percentage point to 5.75 percent, stating concern that inflation might rise above its target range of 1 to 3 percent.
• Japan has moved beyond the deflation that has troubled it for a decade to the point where some economists are now speculating that the Bank of Japan will soon have to limit the nation's money supply - the fuel that powers an economy.
"Japan's predicament is more severe than the one Greenspan faces," writes David Malpass, chief economist of Bear, Stearns & Co., a Wall Street firm. "Whereas the Fed has provided 'ample liquidity,' the Bank of Japan has provided enormous liquidity lasting over a decade."
So far, the European Central Bank stands as an exception to the economic tightening trend in the industrial world. At a policy meeting June 3, the bank - which sets monetary policy for the eurozone of 12 nations - left its main interest rate unchanged at 2 percent. That's twice the rate in the US. ECB policymakers were concerned that the high price of oil - then around $40 a barrel, now a bit less - could raise inflation in Continental Europe.
One reason for the bank's hesitancy is that Germany, Europe's most important economy, is still dawdling. An economic institute there predicts the nation's economy will increase 0.6 percent in this quarter from the last quarter - hardly robust.
In several other countries, though, economic growth has been far more dynamic, leading to the tighter policies. In China, for instance, a government think tank last week forecast the country's gross domestic product would grow at a 11.4 percent annual rate in the present quarter.
India's economy, long overlooked, has picked up so much steam that it is getting attention from Wall Street. Its output was soaring at a 10 percent annual rate at the end of 2003. The Asian Development Bank (ADB) expects a husky 7.4 percent growth rate this year. As a whole, Asia's economy has recovered from its 1997 financial crisis. The ADB sees 6.8 percent growth this year, up from 6.3 percent in 2003.
The prospect of rising interest rates to slow down some of these economies even made the discussions at the G8 meeting in Savannah. On Wednesday, during the first meeting of the heads of state, leaders assessed their nations' outlooks. According to Canadian Prime Minister Paul Martin, there was a "reasonable degree of optimism" about the world economy overall.
Still, concern surfaced about the impact of rising interest rates, particularly on countries like Brazil, which carries a large debt with global lenders. "Remember the last time the US rates rose sharply, it lead to the [Mexican] peso crisis of 1994," says John Kirton, director of the G8 Research Group. "When interest rates rise in the US, there is a tendency for lenders to say, "Oh, I can get a higher rate of return than I used to in the US, so rather than invest in Brazil, I'll pull my money out of Brazil and put it in the US.' "
One force that could act as a check on rising rates is the high cost of oil. "Indeed, if oil prices keep rising, that may be enough of a dampener and you won't have to raise interest rates," says Mr. Kirton.
Another factor that might influence rates is the US budget deficit. If it keeps growing, it could produce a sharp devaluation of the US dollar - something that happened in 1985 - which would undercut European exports. That, in turn, could retard European economies. At the summit, French Prime Minister Jacques Chirac expressed concern about the size of the US deficit for this very reason. "The US dollar could fall precipitously, so Europe's situation could be worse," says Kirton.
Foreign governments - especially Japan, China, and other Asian governments - have so far helped prop up the value of the dollar by buying US Treasury securities. Last year, they bought $208 billion of Uncle Sam's assets.
These inflows have helped keep interest rates down in the US. So the present concern is that a fall-off in those purchases could push up American interest rates - even as the Fed moves to jack up rates.
Many watchers of the Federal Reserve expect it to raise interest rates slowly but surely. The stock and bond markets are counting on another 1.25 percent hike by the end of the year. Chairman Greenspan warned the financial community Thursday to anticipate bigger hikes if inflation turns out worse than policymakers expect now.