Inflation is Climbing in Many Developed Counties
June 3, 2021
Economists in the U.S. have been concerned about spiking inflation in the wake of the pandemic, but most other rich counties are seeing similar price increases.
According to the Organization for Economic Cooperation and Development (OECD), consumer prices in its 36 members, mostly rich nations, rose at the fastest pace in more than 12 years. Prices in OECD nations were 3.3% higher in April than they were a year before.
Among the G20, which account for about 80% of all global economic activity, inflation climbed 3.8% annually, up from a 3.1% increase in March.
The recent surge in inflation has worried some investors, though many economists argue this inflation will be transitory, attributing it to the base effect, meaning that year-over-year comparisons are being skewed by the impact of the pandemic. For example, energy prices for OECD members were 16.3% higher in April than a year prior, but in April 2020 global demand for energy cratered as travel ground to a halt. Now that demand is surging, prices are climbing.
Most central banks around the world, including the Federal Reserve, believe that once supply and demand return to equilibrium, inflation will moderate. Many economists, however, worry that inflation may be more severe and persistent and that central banks’ accommodating fiscal policies are exacerbating the issue.