OECD Says Global Inflation Continues to Ease

Inflation rates across the world's largest economies eased for the fifth straight month in October as energy prices fell, an indication that few central banks will raise their benchmark interest rates in the months ahead.

The Organization for Economic Cooperation and Development Tuesday said the annual rate of inflation in its 34 members was unchanged at 1.7% in October. Among the Group of 20 leading developed and developing economies, it fell to 2.5% from 2.6%, extending a decline that began in June. The G-20 accounts for 90% of global economic activity.

Slowing inflation rates reflect the disappointingly weak performance of the global economy in 2014 and falling energy prices.

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 make households and businesses postpone spending and investment.

Some economists say it is the biggest problem facing the global economy as it enters 2015, and will likely lead to further stimulus efforts by a number of central banks, while others will wait longer to raise their benchmark interest rates from unusually low levels.

"Excessively low and economically harmful inflation has become pervasive across the global economy," said Joachim Fels, an economist at Morgan Stanley. "We expect central banks to pick up the gauntlet and fight back against low inflation with further monetary accommodation that will keep interest rates low and global liquidity ample throughout 2015."

Many large economies have experienced a decline in inflation rates over recent months, largely reflecting declining energy prices. Among OECD members, energy prices fell 0.3% in the 12 months to October, having fallen by 0.1% in the 12 months to September. The sharp fall in oil prices since last week's decision by the Organization of the Petroleum Exporting Countries to leave its output target unchanged despite weakening demand is likely to further drops in inflation rates.

However, only in Europe have falling energy prices contributed to very low annual rates of inflation, and in a number of countries, to consumer prices that are lower than they were a year earlier. According to the OECD, eight of its members experienced a decline in prices over the 12 months to October, only one of which wasn't European: Estonia, Greece, Hungary, Israel, Poland, Slovenia, Spain, and Switzerland.

Russia has been the main exception to the global pattern as the ruble has weakened sharply in recent months, pushing up prices of imported goods and services. Its inflation rate rose to 8.3% from 8.0%, and the central bank's first deputy chairwoman Ksenia Yudaeva said on Monday that the it will climb above 10.0% in early 2015 for the first time in several years.