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September 3, 2014

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Inflation in OECD slows to 1.9%

INFLATION in advanced economies slowed in the year through July but was well above the eurozone level now flirting with deflation, OECD data showed yesterday.

Inflation across the OECD 34 members was 1.9 percent in the year through July, compared with 2.1 percent in June.

This is a sharp fall from one month to the next, but still leaves inflation around the level of 2 percent which central banks in advanced economies consider to be appropriate for ensuring reasonable price stability.

“This slowdown in the annual rate of inflation was mainly driven by lower energy prices,” the Organization for Economic Cooperation and Development said in a monthly estimate.

The assessment comes as the European Central Bank and the Bank of England hold meetings on monetary policy this week.

In the eurozone, the ECB is said to move slowly toward a further easing of monetary conditions. The latest official data show eurozone inflation has fallen to just 0.3 percent.

The BOE is expected to tighten monetary conditions sometime next year, although a recent easing of price pressures in Britain has delayed this prospect.

The eurozone, however, is now perilously close to deflation, a climate of falling prices which can cause businesses and consumers to delay purchases, further reducing demand, pushing up unemployment and therefore holding down prices.

Apart from France, where growth was stable at 0.5 percent, “annual inflation slowed in all major OECD economies in July 2014,” the OECD said.

Inflation in the US eased to 2 percent from 2.1 percent, in Britain to 1.6 percent from 1.9 percent, and in Japan to 3.4 percent from 3.6 percent, the OECD said.




 

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