The Guardian

OECD warns against pulling plug on support despite inflation fears

Larry Elliott Economics editor

The west’s leading economic thinktank has warned governments and central banks against an over-hasty withdrawal of support for growth amid concerns that recovery from the pandemic-induced recession is incomplete.

The Paris-based Organisation for Economic Co-operation and Development said a continuation of the stimulus policies of the past 18 months was justified because the recent pickup in inflation was likely to prove temporary.

Central banks including the US Federal Reserve and the Bank of England have started to voice concerns about rising cost of living pressures but the OECD said policy support was still needed as long as the outlook was uncertain, and employment had not yet recovered to its pre-crisis levels.

It said central banks should combine loose monetary policy – keeping interest rates low and continuing with asset purchase programmes – with clear guidance about how high they would be prepared to see inflation go before taking action.

The OECD’s secretary-general, Mathias Cormann, said: “The world is experiencing a strong recovery thanks to decisive action taken by governments at the height of the crisis. But as we have seen with vaccine distribution, progress is uneven. Ensuring the recovery is sustained and widespread requires action on a number of fronts – from effective vaccination programmes across all countries to concerted public investment strategies to build for the future.”

The thinktank said the world economy was on course to grow slightly less fast than it expected in its halfyearly outlook three months ago. Its interim update pencilled in expansion of 5.7% in 2021, down 0.1 points on its previous estimate.

Five of the members of the G7 – the leading industrial nations – are now forecast to grow less rapidly than in May. The UK’s growth forecast has been revised from 7.2% to 6.7%, while the US and Germany have seen downgrades of 0.9 and 0.4 points to 6% and 2.9%. France’s growth estimate has been increased by 0.5 points to 6.3% while Italy is now on course for 5.9% growth this year, up 1.4 points.

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2021-09-22T07:00:00.0000000Z

2021-09-22T07:00:00.0000000Z

https://guardian.pressreader.com/article/282187949160145

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