OECD Warns Middle East Conflict Escalates Global Stagflation Risk, Central Banks May Face Dilemma of Fighting Inflation and Supporting Growth

BlockBeats News, May 19th, Secretary-General of the OECD, Mathias Cormann, stated that the escalating Middle East conflict is creating a "double blow" to the global economy—dragging down economic growth on one hand and fueling inflation on the other hand. Global central banks may be forced to make a difficult balance between "anti-inflation" and "pro-growth."

Cormann mentioned that the OECD had already issued a warning about these risks in the March interim economic assessment and is planning to update the global economic outlook on June 3rd. He pointed out that with the rise in oil prices and the spillover of energy shocks, if it further triggers wage hikes and other "second-round inflation effects," even though economic growth has slowed, central banks around the world may still have to maintain a tight policy.

Reports indicate that the recent G7 Finance Ministers and Central Bank Governors meeting held in Paris originally focused on long-term structural issues such as the U.S. fiscal deficit. However, with the escalation of the Middle East situation and the global bond market experiencing sell-offs, energy prices and inflation risks quickly became the center of discussion at the meeting.