OECD Inflation Rate Fell in January

By Paul Hannon

The annual rate of inflation across developed economies fell to its lowest level for more than two years in January, a development that opens the way for leading central banks to shore up faltering growth through additional stimulus measures.

Figures released by the Organization for Economic Cooperation and Development on Tuesday showed consumer prices in its 34 member countries rose by 1.7% in the 12 months to January, having risen by 1.9% in the 12 months to December 2012. The last time the inflation rate was that low was in November 2010.

However, inflation rates picked up in a number of large developing economies, suggesting that global inflationary pressures have not entirely receded.

The relatively low level of inflation across so many leading economies should give central banks more room to cut their key interest rates or provide other forms of stimulus to counter a global economic slowdown.

While there is no agreed level of inflation between developed economies, most central banks have explicit targets for annual price rises of around 2.0%.

The European Central Bank and the Bank of England are expected to leave policy unchanged when their monthly meetings conclude Thursday, while the Reserve Bank of Australia left its key interest rate unchanged at a meeting Tuesday.

But the Bank of Japan seems set to provide substantial amounts of new stimulus in the months to come, and others may follow if growth continues to disappoint.

Across OECD members, energy prices rose by 1.8% in the 12 months to January, down sharply from the 2.9% increase in the 12 months to December. Food prices rose at an unchanged rate of 2.1%.

Excluding volatile items such as food and energy, the "core" rate of inflation remained at 1.5%.

Among OECD members, the annual rate of inflation was highest in Turkey, where prices rose by 7.3%, while prices in Switzerland and Japan were 0.3% lower than in January 2012.

Among large developing economies, the inflation rate fell in China and South Africa, but rose in Brazil, Russia, Indonesia and India.

Write to Paul Hannon at paul.hannon@dowjones.com

Corrections & Amplifications

This story was corrected at 1311 GMT because the original misstated Turkey's inflation rate in the 10th paragraph.

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