The annual rate of inflation picked up across the Group of 20 largest economies in May, but remained well below desired levels across developed nations despite a wave of increasingly aggressive stimulus measures from central banks.
The Organization for Economic Cooperation and Development Thursday said the annual rate of inflation in its 34 members rose to 0.6% from 0.4% in April, well below the 2.0% regarded by most central bankers in developed economies as consistent with healthy economic growth.
The Paris-based research body said inflation across the G-20, which accounts for 85% of global economic output, also picked up, to 2.6% from 2.5%.
The figures indicate that a wave of fresh stimulus measures enacted by central banks around the world since late last year has yet to achieve its main goal--minimizing the risk of a slide into deflation.
Even without such a period of falling consumer prices, policy makers believe low inflation rates are hindering the economic recovery. When inflation is low, companies, households and even governments have a harder time cutting their debt loads, a particular problem for a number of highly-indebted nations in the eurozone. And while very low inflation or falling prices can help boost real incomes, it can also encourage households and businesses to postpone spending and investment.
The struggles to generate inflation have led some central banks to take unprecedented action, including negative interest rates that essentially charge households and businesses to keep their savings on deposit at banks. Sweden's Riksbank Thursday cut its main interest rate to minus 0.35% from minus 0.25%--a record low--and increased its bond buying program as it stepped up its battle to raise inflation toward a 2% target.
Other central banks to add fresh stimulus include the Bank of Japan, the European Central Bank, the Reserve Bank of India, the People's Bank of China and a host of other, smaller institutions.
But they are facing an uphill struggle, with many indications of an excess of the capacity to supply goods and services over demand. The United Nations' Food and Agriculture Organization, working with the OECD, Wednesday forecast that world food prices will fall over the coming decade with more produced than is needed.
Some policy makers worry that the focus on boosting inflation in the short term has required such easy policy that a fresh financial crisis is in the making. The Bank for International Settlements issued a stark warning Sunday that the feeble global economy remains too dependent on monetary policy to stimulate demand in the absence of more lasting structural reforms.
By contrast with most of its peers, the U.S. Federal Reserve has signaled its desire to raise its benchmark interest rate later this year, anticipating a pickup in inflation after energy prices stabilize. The Bank of England has also said its next move will most likely be a rate hike, probably in early 2016.
According to the OECD, eight of its members experienced a decline in prices over the 12 months to May, down from 14 in the 12 months to April. Most of those were in Europe, although consumer prices were unchanged in the U.S. and declined in Israel.
Write to Paul Hannon at paul.hannon@wsj.com
(END) Dow Jones Newswires
July 02, 2015 06:12 ET (10:12 GMT)
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