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OECD: Omicron may intensify supply shortages and inflation

by LLB Reporter
1st Dec 21 11:26 am

The OECD is also concerned that the Omicron variant may intensify supply shortages and price pressures building in the global economy.

Laurence Boone, chief economist of the OECD, has told the Financial Times that the latest Covid-19 variant is “adding to the already high level of uncertainty and that could be a threat to the recovery, delaying a return to normality or something even worse”.

It points out that:

  • disruptions in energy, food and commodity markets have pushed up prices
  • high energy prices and fuel shortages are limiting manufacturing of key materials and intermediate goods
  • bottlenecks in production chains are spreading to more generalised shortages of goods.

Inflation is already at a 13-year high in the UK, and at 30-year highs in the US and Germany.

The OECD predicts price pressures will peak earlier next year, but warns that: “The main risk, however, is that inflation continues to surprise on the upside, forcing the major central banks to tighten monetary policy earlier and to a greater extent than projected.

“Such an outcome could stem from a number of possible factors, including prolonged supply disruptions, an upward shift in inflation expectations, labour market pressures, or if prices for a wider range of goods and services start to rise substantially.”

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