US Inflation Highest Among OECD Countries; Global Debt Hits Record $226 Trillion

A participant stands near a logo of IMF at the International Monetary Fund - World Bank Annual Meeting 2018 in Nusa Dua, Bali, Indonesia, on Oct.12, 2018. (Johannes P. Christo/Reuters)

The U.S. economy had the highest level of inflation in 2021 among Organization for Economic Cooperation and Development (OECD) countries, according to recent OECD data.

The annual growth rate in the U.S. consumer price index (CPI) totaled 6.2 percent in the 12 months ending in October, higher than the OECD average of 5.2 percent.

Canada was next on the list, as the country recorded a 4.7 percent inflation rate. Germany and the UK also ranked quite high, with 4.5 percent and 3.8 percent inflation, respectively. Italy reported 3 percent inflation, while France had an inflation rate of 2.6 percent.

Japan’s annual CPI barely budged, edging up by just 0.1 percent.

According to the International Monetary Fund’s (IMF) World Economic Outlook, Venezuela had an annual inflation rate of 2,700 percent, the highest in the world. This was followed by Sudan (194.6 percent) and Zimbabwe (92.5 percent).

Speaking at a recent event hosted by the World Health Organization (WHO), Gita Gopinath, IMF chief economist, warned about prolonged inflationary pressures in 2022.

Gopinath said the Omicron coronavirus variant could cost the global economy an extra $5.3 trillion on top of the current figure of $12.5 trillion. She noted that central banks worldwide don’t possess the ability to sustain loose monetary policy and low interest rates.

“We are now in the phase where countries around the world just don’t have the space to keep monetary policy very loose, to kind of keep interest rates extremely low. We are seeing inflationary pressures building up around the world,” she said. “And so think of a situation where you could have this pandemic last longer, you have longer supply disruptions that are putting inflationary pressures, and then we have the real risk of something we have avoided so far, which is stagflationary concern.”

The Federal Reserve building in Washington on Oct. 22, 2021. (Daniel Slim/AFP via Getty Images)

Last week, the Federal Reserve’s policy-setting Federal Open Market Committee (FOMC) announced plans to accelerate the tapering of its pandemic-era quantitative easing stimulus and relief program and complete it by March. The FOMC rate projections also suggest that three rate increases will take place in 2022.

The Bank of England raised interest rates for the first time in three years. The European Central Bank left rates on hold while cutting its pandemic emergency purchase program.

The 2022 Inflation Outlook

In the United States, many economists and market analysts anticipate inflation to remain high in the first half of 2022, before it begins to ease by the end of the year. It’s estimated that inflation will finish at around 3 percent in 2022, higher than the U.S. central bank’s official target rate of 2 percent.

Economic growth concerns have been heightened in the wake of the Omicron variant. But inflation risks continue to be the top concern heading into 2022.

In a research note, RBC Economics alluded to rising commodity prices, easing fiscal and monetary policy stimulus, and higher input costs.

“Some of these factors will ease as time passes however consumer demand is strengthening and additional production capacity is limited,” economists Craig Wright, Dawn Desjardins, and Nathan Janzen stated in the report. “With more purchasing power chasing increasingly scarce supply of goods and services, inflation rates are likely to remain above central banks’ targets throughout 2022.”

Morgan Stanley also expects global inflation to recede in 2022, purporting in a note that “we are now at, or close to, the worst level of supply chain disruption.”

“The key distinction in our minds is that temporary inflation is measured in multiple percentage points, whereas the permanent rise in inflation is measured in tenths,” Morgan Stanley Chief U.S. Economist Ellen Zentner said.

The Fed raised its inflation forecast for 2022, as it expects the personal consumption expenditure (PCE) price index to clock in at 2.6 percent, up from 2.2 percent.

People in Manhattan in New York on Nov. 29, 2021. (Spencer Platt/Getty Images)

The revision came soon after Fed Chair Jerome Powell and Treasury Secretary Janet Yellen retired the term “transitory” when discussing inflation during congressional testimony.

The U.S. annual inflation rate advanced to 6.8 percent in November, the highest reading in nearly 40 years, led by surging food and energy prices.

The IMF confirmed in a separate report that global debt has climbed to $226 trillion, rising by 28 percentage points to 256 percent of gross domestic product in 2020. This represents the largest one-year debt spike since World War II, buoyed by record-high public and private debt accumulation.

“The large increase in debt was justified by the need to protect people’s lives, preserve jobs, and avoid a wave of bankruptcies. If governments had not taken action, the social and economic consequences would have been devastating,” the report reads. “But the debt surge amplifies vulnerabilities, especially as financing conditions tighten. High debt levels constrain, in most cases, the ability of governments to support the recovery and the capacity of the private sector to invest in the medium term.”

The study authors stated that it’s “critical” to strike a fine balance between “policy flexibility, nimble adjustment to changing circumstances, and commitment to credible and sustainable medium-term fiscal plans.” This would facilitate a decrease in debt risks and support central banks’ efforts to fight inflation, they said.

In the United States, the national debt exceeded $29 trillion in November.