OECD Tells Central Banks Not to Panic Over Inflation

The OECD told central banks in its latest global economic outlook not to immediately impose tighter policies amid inflation surges to allow for recovery.

The organization said in its December outlook that demand would stabilize and supply bottlenecks will fade as people return to the labor force, while prices are expected to peak at the turn of the year.

“In current circumstances, the best thing central banks can do is to wait for supply tensions to diminish and signal they will act if necessary,” said OECD Chief Economist Laurence Boone.

Boone noted that “should supply constraints persist, while GDP and employment continue to grow briskly and fuel broader price increases, higher inflation pressure could last longer, destabilizing people’s expectations,” then central banks could take action.

Persistent inflation has been weighing pressure on central banks across the world. The U.S. Federal Reserve has been mulling over the pace of its monetary tightening after seeing prices grow at their fastest pace since 1990, while European central banks have begun pushing interest rates up.

Meanwhile, economists are expecting the Bank of England to hike interest rates in the following months after Britain’s inflation hit a decade high in October.

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