BAKU, Azerbaijan, December 4. The Organization for Economic Co-operation and Development (OECD) has cautioned that the pace of disinflation could be slower than previously anticipated, posing challenges for central banks to ease monetary policy as expected, Trend reports.
While inflation is projected to continue its decline in 2025-2026, driven by moderating unit labor costs, increased productivity, slower wage gains, and falling profit shares, several factors could result in higher core inflation than anticipated.
One key concern is that disinflation in services has been slower than in past inflationary periods. To bring aggregate inflation back to target, services price inflation would need to fall significantly, particularly in the United Kingdom and many advanced economies, including the euro area and the United States. However, inflation trends vary across countries, with some, such as Korea, Mexico, New Zealand, and Israel, potentially aligning more closely with their inflation targets.
The OECD also highlights that services inflation could remain high if relative prices return to pre-pandemic trends, and further labor shortages could lead to upward pressure on wages and inflation. In addition, weak housing supply growth may contribute to persistent housing cost inflation, while rising trade restrictions or a resurgence in global shipping costs could also push goods price inflation higher.
The OECD's baseline projections assume that shipping prices will remain above 2023 levels, and a substantial rise in shipping costs could add 0.14 percentage points to OECD inflation in 2025-2026, with even more significant impacts in emerging-market economies.
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