The Organization for Economic Co-operation and Development on Friday, in its Economic Outlook Update, advocated further interest rate increases in several economies, including the eurozone and the United States, and these support measures have become focused on the most vulnerable.
In an update to its Interim Economic Forecasts released today, titled “The Fragile Recovery,” the OECD argues that “monetary policy needs to remain constrained until there are clear signs that pressures on underlying inflation are permanently reduced.” .
“Further interest rate increases are still needed in many economies, including the US and the Eurozone. With ‘core’ inflation slowly easing, interest rates are likely to remain high until mid-2024,” he notes.
Thus, he expects interest rates to peak between 5.25%-5.5% in the US, 4.75% in Canada and 4.25% in the Eurozone (key refinancing rate) and the UK.
He predicts that “the expected decrease in inflation over the next two years may allow for a slight easing of monetary policy in some economies in 2024, especially in those where the tightening cycle is already close to completion.”
The OECD also said budget support to mitigate the impact of rising food and energy prices should become more focused on the most vulnerable, arguing that better targeting and “timely” reductions in public support would help ensure sustainability. -Maintain incentives to reduce energy use and reduce demand.
It also calls for reform efforts and enhanced international cooperation to help overcome food and energy insecurity.
