Inflation to Rise Faster Than Previously Projected: OECD

Consumer prices in the United States and most other leading economies will rise faster than previously anticipated and will settle above pre-pandemic levels, the OECD said in its newest economic outlook, while urging central banks to set out clear strategies for managing inflationary pressures.

The headline rate of consumer price inflation is projected at 3.7 percent in 2021 on average in the Group of 20 leading economies, before rising to 3.9 percent in 2022, the Paris-based organization said in its September economic outlook (pdf). This is 0.2 of a percentage point higher for 2021 and 0.5 of a percentage point higher for 2022 than the previous May estimate.

In the United States, inflation is now expected to come in at 3.6 percent in 2021, higher by 0.7 of a percentage point over May’s estimate. In 2022, U.S. consumer price inflation is projected at 3.1 percent in 2022, an upward revision of 0.5 of a percentage point compared to prior estimates.

“Nevertheless, the outlook for inflation varies markedly. It has risen sharply in the U.S. and some emerging market economies but remains relatively low in many other advanced economies, particularly in Europe,” the OECD said in a release.

The international organization said higher commodity prices and global shipping costs were adding around 1.5 percentage points to annual consumer price inflation in the G-20 countries and that these factors are to blame for the bulk of the uptick in prices over the past year.

The OECD expects the impact of commodity prices and rising shipping costs on inflation to ease gradually, with capacity expanding and costs stabilizing.

“Supply pressures should...

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