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Reading: OECD Forecasts Central Bank Interest Rate Hikes
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PhotoNews Pakistan > Business > OECD Forecasts Central Bank Interest Rate Hikes
Business

OECD Forecasts Central Bank Interest Rate Hikes

Web Desk
By Web Desk Published June 3, 2026 2 Min Read
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The OECD inflation warning said governments may bear the brunt of the response to an energy-driven price shock, although high public debt leaves them with limited room to act.

The Organisation for Economic Co-operation and Development said broad fiscal support could also worsen the supply crunch. It warned that such measures may encourage energy use when supplies remain tight.

Meanwhile, central banks face a harder policy trade-off. The OECD said it must curb inflation without causing unnecessary damage to economic growth.

In a milder scenario, the OECD expects some initial interest-rate increases. However, it said central banks may cut rates in 2027 as price pressures ease.

🔴 EN DIRECT: Perspectives économiques de l’#OCDE

Regardez le SG de l’OCDE @MathiasCormann & le Chef économiste @stescarpetta présenter les projections éco. les plus récentes de l’OCDE en amont de la RCM.#OECDministerial https://t.co/RHtPKe2gub

— OCDE (@OCDE_fr) June 3, 2026

If the disruption persists, the OECD expects a stronger policy response. It said rates would likely rise by 50 to 75 basis points in most countries before cuts return in 2027.

The OECD also said that severe market tightening could force central banks to rethink their bond runoff plans. In that case, they may slow reductions in sovereign bond holdings bought during earlier crises.

For the European Central Bank, the OECD said policymakers could also revive long-term refinancing operations. Other central banks may even restart quantitative easing if market stress deepens.

Read: Oil Prices Rise Over 2% After Israel Expands Lebanon Push

Scarpetta said central banks can look through supply-driven price increases as long as inflation expectations remain anchored.

However, he said policymakers may need to respond if price pressures spread or growth weakens sharply.

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