Lower energy prices causing inflation to drop in developed countries, economic watchdog says

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PARIS – Inflation slowed in major developed countries in February amid a steep drop in energy prices, a report showed Tuesday.

The Organization for Economic Cooperation and Development said consumer price inflation in its 34 member countries slowed to 1.4 per cent in February from 1.7 per cent in January.

Low inflation has become a key concern for many developed countries. If consumers and businesses put off purchases in the hope of cheaper deals later, that can hurt growth.

An outright drop in prices, called deflation, can be very hard to reverse. Japan was stuck in deflation for about two decades, during which time its economy barely grew.

The U.S. inflation rate was 1.1 per cent in February, while the European Union’s was just 0.8 per cent, well below the 2 per cent many economists deem a suitable level.

The OECD, a think-tank for the world’s most developed countries, said however that excluding volatile food and energy prices, core inflation for its 34 members was stable for a fourth month running at 1.6 per cent.

Inflation in G-20 countries, which includes major developing countries such as Indonesia, India and Brazil, slowed to 2.3 per cent in February from 2.6 per cent in January, the OECD said.

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