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The OECD warned on Tuesday that high inflation would continue for the next two years, calling for clever treatment by policy makers to ensure that inflation was a temporary decline while economic recovery was on track. bottom.
In the latest economic outlook, Paris-based clubs have predicted that inflation will be significantly higher in 2021 and 2022 than previously predicted in most G20 countries, which is permanent. It doesn’t have to be a problem.
Lawrence Boon, chief economist at the OECD, said most of the developed economies have released optimistic growth forecasts and that OECD forecasting activity will reach pre-pandemic forecast levels by the end of 2022.
“The speed of recovery has increased inflationary pressure and has rapidly pushed up to pre-pandemic expectations,” the OECD said. “Policies in developed countries need to monitor these developments without delay.”
For now, Boone added that managing inflation would be a “very difficult balancing act.”
The OECD predicts that average inflation across the G20’s major economies will reach 4.5% in the fourth quarter of this year, with 1.5 percentage points from rising shipping costs and commodity prices. ..
Since then Last forecast for JuneThe OECD has revised its inflation forecasts for 2021 and 2022 upward by more than 0.3 percentage points in most countries. Inflation forecasts for the United States in 2021 rose from 2.9% in June to 3.6%. In the UK, the equivalent was 1.3% in June and inflation this month was 2.3%.
Inflation forecasts have also risen sharply since June in 2022. In France and Germany, forecasts rose from 0.8% and 1.6% to 1.4% and 2.6%, respectively.
The OECD tells the public that the most urgent task is to adjust prices to levels that were always expected after a temporary decline during a pandemic, with many temporary characteristics of rising inflation. Said that.
Boone said supply bottlenecks will ease as coronavirus vaccination rates rise, especially in emerging economies. Due to the large amount of pandemic-related government support in the past, demand was unlikely to go out of control.
The main concern before the virus was that inflation was too low, but the current message was that prices would settle at a higher rate than before the pandemic — “and that’s a good thing” — but they were expected. Not as expensive as it will go in the coming months.
Mr Boone said consistent communication about many temporary natures of inflation helps prevent businesses and households from thinking that it is fair to raise prices and demand higher wages.
She added that the government also had a role to play in ending the pandemic story of being able to raise money for anything just by borrowing.
She welcomed efforts in the United States and Europe to spend more on climate change and digital transformation efforts, saying: right? It’s not free money forever. ”
US President Joe Biden is trying to raise money for infrastructure spending with higher taxes, Potentially difficult time In Congress over the next few weeks.
The OECD said donors have navigated higher inflation in the coming months, but the good news is that recovery is “very fast” and developed countries are likely to suffer minimal long-term damage. Met.
This would be fine for a country like the United States that worked well before the pandemic, but not enough for a country where recovery to the pre-pandemic path still means high unemployment and weak growth. She added.
“Many economies are about to be in their former state, but they have more debt,” said Boone.
According to the OECD, emerging economies still suffer from high rates of coronavirus infections and low levels of vaccination, and remain more vulnerable to both weak recovery and high inflation. The outlook has deteriorated significantly.
However, the OECD believed that the credibility of institutions such as central banks and early action to stop inflation could help the OECD get out of the coronavirus crisis rather than the 2008-2009 financial crisis.
OECD raises inflation forecasts and pays attention to long-term rising risks
Source link OECD raises inflation forecasts and pays attention to long-term rising risks