Cool, Calm, Collected

Image source: Maddie Red - Shutterstock

What's going on?

A major economic organization said on Tuesday that inflation is here to stay for the next two years, but it’s actually remarkably relaxed about the whole affair.

What does this mean?

Let us count the ways prices are being pushed higher and higher these days: massive pent-up demand, ongoing supply chain bottlenecks, sweeping government economic support, surging energy costs for manufacturers and homeowners alike – the list goes on. The US and the UK have already read the writing on the wall and bumped up their inflation forecasts, but now it’s the OECD’s turn: the organization is predicting that the inflation rate across 20 of the biggest economies will hit 3.7% in 2021 and 3.9% in 2022 – up from its earlier forecasts of 3.5% and 3.4% respectively.

Why should I care?

The bigger picture: There’s hope yet.
The OECD isn’t particularly het up about the situation, saying there probably won’t be much long-term damage to these countries’ economies if they can successfully navigate the inflation challenges. It wasn’t quite so confident about emerging economies’ chances, mind you: their high debt, high rates of infection, and low rates of vaccination mean they’re likely to have much weaker recoveries ahead of them.

Zooming out: China’s no biggy either.
China’s latest crackdown has plenty of investors on edge: the country’s been coming down hard on the property sector, which represents an estimated 29% of the country’s economy. So it follows that investors aren’t just worried about what effect the collapse of giants like Evergrande might have on the country’s economy, but on the world at large. But even that doesn’t seem to worry the OECD too much: it reckons China’s financial system isn’t interconnected enough with the rest of the world’s to cause wholesale problems.

Originally posted as part of the Finimize daily email.

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