Surging inflation could hinder global economic recovery from the pandemic, OECD warns
OECD expects US inflation rate to average 4.4% next year
Fed recognized they're 'behind the curve' on inflation: Holtz-Eakin
FOX Business contributor Sean Duffy and American Action Forum president Douglas Holtz-Eakin discuss the risks of higher inflation on 'FOX Business Tonight.'
A rise in inflationary pressures around the world may be longer-lasting than previously anticipated, posing a fresh risk to the global economic recovery from the coronavirus pandemic, the Organisation for Economic Cooperation and Development said Wednesday.
In its latest economic outlook, the Paris-based organization forecast that global growth will hit 5.6% this year before cooling to 4.5% in 2022 and 3.2% in 2023. In the U.S., the OECD expects GDP – the broadest measure of goods and services produced in the country – to grow by 5.6% this year, 3.7% in 2022 and 2.4% in 2023.
WHERE IS SURGING INFLATION HITTING AMERICANS THE HARDEST?
But the OECD warned the global recovery has lost its earlier momentum as companies struggle to keep up with a post-pandemic spike in consumer demand amid bottlenecks in the global supply chain that have caused inflation to soar worldwide. Like most economists, the OECD projected that inflation will peak in 2021 but will remain elevated in 2022 and 2023 until the supply chain disruptions abate.
A man fuels a car at a gas station in New York, on Oct. 13, 2021. (Xinhua via Getty Images / Getty Images)
"The renewed inflationary pressures risks lasting longer than was expected a few months ago," the OECD said. "Rising food and energy prices are hitting low-income households in particular."
In the U.S., the government reported last month that consumer prices surged 6.2% in October compared with a year earlier. So-called core prices, which exclude the more volatile measurements of energy and food, rose 4.6% over the past year. Both are the largest increases since 1990.
Rising inflation is eating away at strong gains and wages and salaries that American workers have seen in recent months (average hourly wages in the U.S. actually fell 1.2% last month compared with October 2020 when accounting for inflation).
Federal Reserve Board Chair Jerome Powell testifies before Senate Banking, Housing, and Urban Affairs hearing to examine the Semiannual Monetary Policy Report to Congress, Thursday, July 15, 2021, on Capitol Hill in Washington. (AP / AP Newsroom)
The OECD said it expects consumer-price inflation in the U.S. to average 4.4% in 2022, up from 3.1% when it released its forecasts in September, and to hit 2.5% in 2023. Both rates are well above the Federal Reserve's 2% target. Still, the OECD said there's little that central banks can do to address the soaring inflationary pressures, and instead urged governments and businesses to address the root cause of the imbalances – including making sure vaccines are readily available for everyone.
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Fed Chairman Jerome Powell has repeatedly maintained that inflation is "transitory" and blamed disrupted supply chains, pent-up consumer demand and stimulus cash for the run of higher prices. But he's backed away from that assertion in recent days, telling lawmakers during Capitol Hill testimony that it's "probably a good time to retire" the word "transitory."
"The word ‘transitory’ has different meanings to different people," he said on Tuesday. "We tend to use it to mean that it won’t leave a permanent mark in the form of higher inflation."