The Organization for Economic Co-operation and Development (OECD) expects global inflation in most economies to decline faster than previously expected. However, the Center for Economic Research from Paris urges central bankers not to be complacent in the fight against inflation. According to the OECD, it is still too early to say whether the sharp increases in interest rates last year have sufficiently contained upward pressures on prices.
The think tank notes that deflation, or negative inflation, is deepening in China and that inflation in the United States is on a downward trend. But in Brazil, inflation is falling less quickly than expected at the beginning of the year, while wage increases continue in Japan. This may lead to new price increases.
It was announced last week that daily life in China became 0.8 percent cheaper in January compared to last year. Therefore, consumer prices showed the strongest decline since 2009. An inflation rate of less than 0 percent indicates that the world's second-largest economy is struggling to stimulate economic growth through domestic demand.
Due to a series of interest rate hikes by the European Central Bank, inflation is now much lower than it was at the peak in 2022. Interest rates could fall again this year, but the central bank is cautious about indicating exactly when that could happen. . Policymakers first want to see more evidence that inflation is heading toward the 2% target.
Fabio Panetta, a member of the European Central Bank's Governing Council, suggests that interest rate cuts should start soon. “Macroeconomic conditions indicate that disinflation has reached an advanced stage. Progress towards the 2 percent target remains rapid,” he said at an event in Genoa, Italy. “The time to reverse the monetary policy stance is rapidly approaching,” Panetta continued.
Many economists and investors believe that interest rates will be lowered from April. However, this depends on how inflation continues to develop. This rate has fallen sharply in recent months, but the ECB's 2 percent target is not expected to be met until next year.
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