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Global Central Banks to Continue Rate Hikes, Even in Large Slowdown – OECD Outlook – Bloomberg

The Organization for Economic Co-operation and Development (OECD) on Thursday called on central banks to keep raising interest rates to combat widespread inflation even as the global economy slows sharply.

In its latest economic outlook, the OECD said unexpected price spikes and the resulting impact on real incomes are hitting people everywhere, and the problem will only get worse if policymakers fail to act.

The OECD has revised its 2023 inflation forecast upwards from its forecast in September. Inflation in 2024 will remain well above many central bank targets, with 2.6% in the United States, 3.4% in the eurozone and 3.3% in the United Kingdom.

Inflation Is Set to Stay Above Target

Change in consumer prices (YoY)

Source: Bloomberg, Organization for Economic Cooperation and Development

In an interview with Bloomberg News, OECD Interim Chief Economist Pereira said: “We need to make inflation a top priority now, or else we’ll either end up in a vicious wage-price cycle like the 1970s, or we’ll end up with strong inflation. It could end up taking hold and causing even more pain, which is necessary to control it.” “The risk of going too far is certainly less than the risk of doing nothing,” he added.

However, the global economy is at a difficult crossroads. Growth has already slowed, weighed down by soaring energy prices following Russia’s invasion of Ukraine. Rising credit costs, especially in low-income countries, are another risk associated with higher interest rates. Two-thirds of low-income countries already have high debt burdens, according to the OECD.

Inflation Forecast for 2023

Change in consumer prices from a year ago

Source: Organization for Economic Cooperation and Development

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