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Inflation in leading economies slows in July: OECD

Inflation in advanced democracies slowed in the year to July but was well above the eurozone level now flirting with deflation, OECD data showed on Tuesday (Sep 2).

PARIS: Inflation in advanced democracies slowed in the year to July but was well above the eurozone level now flirting with deflation, OECD data showed on Tuesday (Sep 2). Inflation across the OECD 34 members was 1.9 per cent in the year to July from 2.1 per cent in June.

This is a sharp fall from one month to the next, but still leaves inflation around the level of 2.0 per cent which central banks in advanced economies consider to be appropriate for ensuring reasonable price stability. "This slowdown in the annual rate of inflation was mainly driven by lower energy prices," the Organisation for Economic Cooperation and Development said in a monthly estimate.

The assessment comes as the ECB and the Bank of England hold meetings on monetary policy this week. In the eurozone, the European Central Bank is believed to moving slowly towards a further relaxation of monetary conditions. The latest official data shows that eurozone inflation has fallen to just 0.3 per cent.

The Bank of England meanwhile is expected to tighten monetary conditions sometime next year, although a recent easing of price pressures in Britain has delayed this prospect. The eurozone, however, is now perilously close to deflation, a climate of falling prices which can cause businesses and consumers to delay purchases, further reducing demand, pushing up unemployment and therefore holding down prices.

With the exception of France - where growth was stable at 0.5 per cent - "annual inflation slowed in all major OECD economies in July 2014," the OECD said. Inflation in the United States eased to 2.0 per cent from 2.1 per cent, in Britain to 1.6 per cent from 1.9 per cent, and in Japan to 3.4 per cent from 3.6 per cent, the OECD calculated.

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