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MNI BRIEF: OECD Sees Inflation at 4.5% in Q4, 3.9% Next Year

MNI (Ottawa)

Paris group says some faster inflation is welcome after years of undershooting.

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Inflation will peak at 4.5% in the fourth quarter across G20 nations on higher commodity prices and transportation snarls according to an OECD forecast published Tuesday, and the Paris-based group also boosted next year's CPI forecast by half a point to 3.9%. Prices this year will rise 3.7% across the G20 or 0.2pp more than the OECD's May projections, in a year where the global economy grows at 5.7%, the fastest pace since 1973.

While the easing of supply barriers should slow inflation to 3.5% by the end of next year inflation risks remain to the upside, including a surge in wages or a jump in price expectations.

"Accommodative monetary policy should be maintained, but clear guidance is needed about the horizon and extent to which any inflation overshooting will be tolerated," the OECD's report said, and fiscal stimulus should remain strong until the pandemic is overcome. U.S. growth this year was cut 0.9pp to 6% while Euro area expansion was raised 1pp to 5.3% and China's left at 8.5%, in a forecast citing shifts in risks from the Delta variant and stronger fiscal support in Europe. UK growth this year was reduced 0.5pp to 6.7%.