Inflation across advanced economies is now at lowest since 2021

INFLATION throughout advanced economies has now slowed to the weakest since December 2021, though underlying price growth is showing a bit more strength, according to the OECD.

The headline gauge for the group that encompasses rich countries around the world fell to 6.5 per cent in May, while a so-called core index that strips out food and energy is at 6.9 per cent. The data were released by the Paris-based organisation on Tuesday (Jul 4).

All members of the club have seen slowing inflation apart from the Netherlands, Norway, and the UK, the OECD said. In the Group of Seven (G7) it is now at 4.6 per cent, the lowest since September 2021.

The numbers highlight how underlying inflation remains stubborn even as overall data could point to some progress by monetary officials in bringing consumer prices under control.

Policymakers around advanced economies are still in tightening mode, with both the US Federal Reserve and the European Central Bank signalling another increase in borrowing costs this month. On Tuesday, the Reserve Bank of Australia kept its interest rate on hold but held out the possibility of further increases.

The data show divergence in the key sources of inflation across the G7. In Italy, food and energy were the main contributors to price growth in May, while so-called core pressures drove it in other countries in that group.

In the OECD club itself, inflation varies wildly, from less than 3 per cent in Costa Rica, Greece and Denmark to more than 20 per cent in Hungary and Turkey. BLOOMBERG