Inflation in OECD area rises to 2.5%

7 Jun 19

Annual inflation in OECD countries rose to an average of 2.5% in April, a 0.2% increase from March, the international development organisation has announced.

Year-on-year inflation rose markedly in Germany (from 1.3% in March to 2.0% in April) and Japan (0.5% to 0.9%), while more moderate increases were seen in countries including the UK (1.8% to 2.0%), Canada and the US (from 1.9% to 2.0%).

The rise appears to have been broadly driven by rallying energy prices, which increased by 3.8% year-on-year, compared with 2.7% in March, the OECD said. Food price inflation slowed by 0.1%, while inflation excluding food and energy rose by 0.1%.

Global oil prices have tumbled more than 20% since late April over trade tensions and fears of weakening demand, which may relieve some upward pressure on inflation.

Indeed, eurozone inflation has since fallen sharply from 1.7% in April to 1.2% in May. Core inflation, which excludes the more volatile energy, food, alcohol and tobacco prices, fell sharply from 1.3% to 0.8%, heaping pressure on policymakers at the European Central Bank.

ECB chief Mario Draghi is expected to announce additional assistance to banks and options to make use of other instruments after his monthly board meeting today.

More drastic measures may not be announced until the US Federal Reserve’s intentions become clearer.

While growth in the eurozone has bounced back from a weak patch in late 2018, the global outlook has grown more uncertain with fraying trade tensions between the US and China and political uncertainty in Western and Southern Europe.

The OECD warned in May that global growth remains highly dependent on “unprecedented” support from monetary policy since the global financial crisis. It called for members to “reignite” the push for free trade and increase fiscal stimulus where possible.

The Paris-based organisation acknowledged that most member countries are loosening their purse strings this year, but insisted some - notably Germany, the Netherlands, Sweden and Switzerland - had room to go further without boosting their debt burden.

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