The day after the European Central Bank raised the price of money by 50 points, the Organization for Economic Cooperation and Development (OECD) insisted this morning that it is necessary to continue down the restrictive path.
"Underlying inflation remains persistent, supported by sharply rising services prices and cost pressures stemming from tight labor markets. Inflationary pressures will force many central banks to keep interest rates high until well into the future." entered 2024", points out the organization in its Interim Outlook forecast report.
The message from the OECD is that monetary policy should continue until there are no signs that core inflation pressures have subsided durably. And that the current adverse banking context should not lead to a change in strategy.
Indeed, the institution considers the risk of contagion from financial turbulence "limited" due to the bankruptcy of several banks in the United States and the delicate situation of Crédit Suisse. "We do not believe there is reason for concern," said Secretary General Mathias Cormann. "There is turbulence", but "the risk of this having a broad impact is limited" since "the regulatory framework has improved over the years", he specified.
For Cormann, Silicon Valley Bank (SVB), the US entity that was intervened last Monday, "was not -he stressed- an important bank from a systemic point of view" and due to its size it was not subject to credit control rules. systemic entities, so that "we must not inflate the impact that it may have on the financial system".
As regards growth forecasts, the organization has improved its data for Spain, which should end this year with a rise in GDP of 1.7%, four tenths more than what was anticipated last November and more than double than the average for the euro area (which stands at 0.8%) and with a rate that exceeds that of the large economies of the euro area such as France (0.7%), Italy (0.6%) and Germany (0.3%). A month ago, the European Commission estimated that Spain would grow by 1.4% in 2024.
The fall in the price of energy and the slowdown in inflation are the two factors that are supporting the Spanish economy, according to the OECD. 2023 will close with inflation of 4.2%, almost half that of 2022 and below the euro zone as a whole (6.2%)
However, the bad news is that core inflation, which excludes more volatile prices such as energy and fresh food, will remain very resilient in Spain. It will go from 3.8% in 2022 to 5% this year. A bad prognosis for next year as well: underlying inflation in Spain will be, according to the OECD, 3.7% in 2024, therefore much higher than the euro area average (3%), as well as those of Germany (3.1%), France (2.3%) and Italy (2.9%).