To combat high inflation, central banks must keep raising interest rates, even at the expense of economic growth. This was stated by the Organization for Economic Co-operation and Development (OECD). According to the OECD, the inflation problem will only get worse if the sharp price increases are not tackled harshly.
All over the world, the purchasing power of households is under significant pressure from skyrocketing inflation. Bringing inflation under control should therefore be a top priority, according to OECD economist Alvaro Santos Pereira. “Otherwise we could be faced with a wage-price spiral like in the 1970s, or a situation where inflation becomes so entrenched that the pain only gets worse. The risks of overacting are less than the risks of not acting, he says.
Ukraine
According to the OECD, inflation is mainly driven by the war in Ukraine, because energy and food prices have risen sharply as a result of the war. The Parisian organization speaks of an “enormous and historic shock” that occurred on the energy market. High inflation also leads to lower consumer confidence.
The OECD also indicated that global economic growth is likely to weaken to 2.2% next year. This year the growth was still 3.1%. For 2024, the situation should improve again and a stronger growth of 2.7% is expected. According to the organization, these forecasts are significantly lower than before the war in Ukraine.
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
