Inflation hits 31-year high of 7.2% across OECD countries

Inflation across the OECD area surged to a 31-year high of 7.2 per cent in January, up from 6.6 per cent in December and just 1.6 per cent a year previously.

Soaring energy prices and supply chain disruption related to Covid-19 has triggered a major cost-of-living squeeze across most of the world, with governments scrambling to protect poorer households from rising prices.

The latest figures from the Organisation for Economic Co-operation and Development (OECD) were compiled in advance of Russia's invasion of Ukraine, which is expected to place further pressure on already high energy prices.

The headline rate of 7.2 per cent was the highest recorded across the bloc of industrialised nations since February 1991.

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Much of the sharp rise in January "reflected in part another sharp rise in inflation in Turkey". Excluding Turkey, inflation in the OECD area rose to 5.8 per cent, after reaching 5.5 per cent in December 2021.

“While services prices accelerated markedly in most OECD countries, energy prices, and to a lesser extent food prices, continued to boost inflation in all the OECD countries,” the OECD said.

Excluding food and energy, OECD year-on-year inflation increased to 5.1 per cent, the highest rate since December 1992, up from 4.7 per cent in December 2021.

The most significant increases between December 2021 and January 2022 were recorded in Italy, the US and Canada, with rises by 0.9, 0.5 and 0.3 percentage points respectively.

Inflation increased in most G7 economies, except in Germany and Japan.

In Germany, the decrease in inflation is explained by the end of temporary factors, such as a VAT reduction and the sharp decline in mineral oil product prices in 2020, which had an upward effect on inflation in 2021, it said.

In the euro area, overall inflation as measured by the Harmonised Index of Consumer Prices (HICP), rose slightly to 5.1 per cent in January.