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OECD Warns Developed Economies to ‘Remain Vigilant for Signs of More Persistent Inflation’

People walk through Pezou Square in New York City on July 13, 2021. (Angela Weiss/AFP via Getty Images)

Organization for Economic Cooperation and Development (OECD) has warned developed economies to “remain vigilant” for signs of “persistent inflation.”

In its September 2021 economic outlook, the聽intergovernmental economic organization noted that “a聽rapid increase in demand as economies reopen has pushed up prices in key commodities such as oil and metals.”

“Food prices are also rising boosting prices especially in emerging markets. Tensions along supply chains caused by the pandemic have added to cost pressures. At the same time, shipping costs have increased sharply,” economists wrote.

Industries across the globe are facing聽acute bottlenecks in supply chains, such as material and worker shortages as well as the skyrocketing prices of materials,聽driven by pandemic lockdown measures. se issues have also affected consumers, who are now faced with empty shelves and higher prices on top of聽rising inflation levels.

OECD noted that the outlook for inflation varies markedly, with most聽large economies such as the United States and some emerging market economies聽experiencing sharply rising inflation levels, while levels remain relatively low in other advanced聽economies, particularly in Europe.

“Annual inflation has risen to over 5 percent in the United States but remains at relatively low rates in many other advanced economies, particularly in Europe and Asia,” the report states.

Labor Department reported that the聽consumer price index, a key inflation gauge that measures how much Americans pay for goods and services, rose about 0.4 percent in September. year-over-year prices increased 5.4 percent, which some noted is the largest yearly increase since January 1991.

While the OECD notes that聽consumer price inflation is projected to moderate from 4.5 percent at the end of 2021 to around 3.5 percent by the end of 2022 among聽G-20 economies鈥攔emaining above the rates seen prior to the pandemic鈥攊t stresses that “sizable uncertainty remains.”

“Supply pressures should fade gradually, wage growth remains moderate and inflation expectations are still anchored, but near-term risks are on the聽upside,” the OECD said.

“Faster progress in vaccine deployment, or a sharper rundown of household savings would enhance demand and lower unemployment but also potentially push up near-term inflationary pressures. Slow progress in vaccine rollout and the continued spread of new virus mutations would result in a weaker recovery and larger job losses,” the report continues.

“Remain vigilant for signs of more persistent inflation,” the report adds.

U.S. Federal Reserve and many economists maintain that the recent spike in inflation is “transitory,” and merely reflective of the ongoing effects of supply-chain breakdowns during the pandemic and shifts in consumer demand as more activities like travel become safer again.

Elsewhere in its September outlook, the OECD also called for the international community to step up its efforts to provide low income countries with the resources they need to provide COVID-19 vaccinations to聽their populations.

聽World Health Organization (WHO) in September urged聽countries to hold off on giving COVID-19 booster shots throughout the month so that poorer nations could provide citizens with their first dose of the vaccine.

WHO Director-General Tedros Adhanom Ghebreyesus told reporters聽at a press conference on Sept. 1聽that some low-income countries,聽including many in Africa, have less than聽2 percent of their adult populations fully vaccinated.

By contrast,聽some high-income countries have adult vaccination rates of 50 percent.

OECD also called on governments to maintain their support to people and businesses that have been impacted by the COVID-19 pandemic and set out clear fiscal and monetary plans pertaining to the economic recovery.

It comes as Federal Reserve officials are reportedly preparing to聽start聽cutting back on monthly bond purchases as early as the middle of next month or mid-December, meaning it will start withdrawing the聽extraordinary support unleashed after pandemic lockdowns聽paralyzed the economy.

Pezou : OECD Warns Developed Economies to ‘Remain Vigilant for Signs of More Persistent Inflation’