Economic Forecast: OECD Sees Inflation Moving Back to Target

Global growth is expected to continue at a modest pace in 2024 and 2025, with inflation declining towards target rates in most countries by 2025, the OECD said in its interim economic outlook released yesterday.

The OECD has revised down its inflation projections for several G7 economies, including the US where it is now expected to be just 2.2% in 2024 and 2% in 2025.

“Some of the factors assisting disinflation over the past year are now dissipating or reversing, while others are vulnerable to geopolitics, extreme weather or unpredictable events. With inflation still above target […] it is too soon to confirm whether the inflationary episode that began in 2021 is over”, the OECD said.

Provided inflation continues to come down, the OECD said it projects policy rate cuts to start in the US by the second quarter this year, and in the euro area by the third quarter.

Out of the G7 economies, the US is projected to see the strongest growth in 2024 at 2.1%, falling to 1.7% in 2025. In contrast, euro area growth will hit just 0.6% this year before increasing to 1.3% in 2025.

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