America Cannot Shake Off Inflation

A closer look at why inflation remains stubborn in the United States despite broad declines elsewhere.

America Cannot Shake Off Inflation

Inflation cooled from its 2022 peak across rich economies, with price gains easing from double digits to a level near central bank targets. By June the OECD average was around 2.5 percent, yet several Anglophone economies including the United States still report lingering price pressures, particularly in services and housing.

Across the United States, slower goods inflation and easing supply disruptions have reduced headline numbers, but core components tied to wages and services costs resist a quick return to target. Central banks say policy will stay restrictive until inflation convincingly slows, a stance that raises questions about growth and budgets in the year ahead.

The persistence of inflation signals a shift in how prices behave in rich economies. It raises the risk that expectations may not re-anchor quickly, especially if wage growth remains resilient.

Policy teams face a delicate balance between cooling prices and sustaining growth. The political questions around budgets and spending will grow louder if households feel the pain longer, and that could affect elections and investor confidence.

Highlights

The road ahead will test patience and policy alike.