World Economy

Global Inflation Stalled in January

The inflation in both the G20 and  OECD countries slowed in January.The inflation in both the G20 and  OECD countries slowed in January.

The inflation in the largest economies in the world remains unchanged for the third consecutive month in January but is slowing down in rich countries, according to OECD data.

The accelerating global economic growth in 2017, which is likely to continue this year, has prompted many investors to expect inflation to grow faster and, as a result, central banks to tighten their monetary policies sooner. These concerns have led to an increase in bond yield and volatility in other financial markets, Economics Gazette reported.

However, the indicators of the OECD suggest that rising inflation is still an opportunity and not a fact. According to the organization, the consumer prices in the G20 economies, which account for the bulk of world economic activity, increased by 2.5% y-o-y in January. The pace is the same as in November and December.

The OECD points out that in all 35 countries—mostly rich countries, the annual rate of inflation slowed down to 2.2% in January, down from 2.3% in December, following a downward trend and the previous month. This decline is not only due to volatile elements such as food and energy prices, as the core inflation reached 1.8% versus 1.9% in the previous month.

The slowdown in inflation is largely limited in the eurozone, but accelerating in Japan, which has been struggling for a long time with a sluggish rise in consumer prices. The US indicator remained unchanged in January, although it has grown significantly since mid-2017.

The inflation in both the G20 and the OECD countries, however, is also slowing towards January 2017. This is confusing for central bankers, as last year was marked by a rapid acceleration of growth among the leading economies and a drop in unemployment.

According to central bankers, the inflation is generated by the difference between demand for goods and services and the ability of the economy to deliver them. As the economy grows and demand strengthens, this gap should narrow and prices rise.

However, the wage growth was missing in 2017, this may change in 2018. Average hourly wage for US private sector employees is 2.9% higher in January on an annual basis.

In Germany, the powerful trade union IG Metall last month secured a pay rise of 4.3% and a one-time payment of €100 ($124.3) per month from January to March, along with other special payments starting next year.

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