Deflating expectations

OECD Observer

Click to enlarge.

Barely a day goes by without a headline written about the end of inflation or even deflation. Looked at more closely, consumer price inflation has practically come full circle in the past 40 years, returning in the early days of the 21st century to the below 5% levels seen in the early 1960s, after spiralling into double digits in many countries in the 1970s and 1980s.

Inflation expectations also changed over the years, though. In fact the very first OECD Economic Outlook in 1967 – when inflation in all the major OECD economies was below 5% – wondered whether European countries were in danger of over-correcting the “excessive” inflationary pressures of the first half of the decade. These pressures pushed Italy’s inflation rate to 8% in 1963, for instance.

Just how high inflation could go was tested in the 1970s when the arrival of the first oil crisis compounded what the December 1973 Economic Outlook said was already an “extremely worrying” inflation picture and brought an end to “the strongest (economic) upswing since the Korean War”.

The following years saw inflation hit its highest level during the period, with Japan peaking at 23% in 1974 when the Outlook said that the effects of excessive demand buildup and the oil crisis were together “putting the economies of member countries to a test which is probably unprecedented outside of war.” By the following year economic recovery was beginning and inflation was seen “levelling out”, although the UK managed to register the highest annual inflation rate of major OECD economies over the entire 40-year period, at 23.7%.

By December 1980 when the oil price had risen 150% in the space of two years, the Economic Outlook was again warning that “the top priority for OECD countries is the reduction of inflation.” In particular it cautioned that US inflation was likely to remain “stubbornly high, at around 9-10%”, although with price rises of 13% that year the US was far from the worst performer, being outstripped by Italy with 21% and the UK with almost 18%.

When it came to the Gulf War in 1990-1991, OECD countries were less susceptible to a price shock. Inflation rose by less than many had expected, and generally stayed below 5% throughout the decade.

©OECD Observer No 235, December 2002

Economic data

GDP growth: +0.6% Q1 2019 year-on-year
Consumer price inflation: 2.3% May 2019 annual
Trade: +0.4% exp, -1.2% imp, Q1 2019
Unemployment: 5.2% July 2019
Last update: 8 July 2019

OECD Observer Newsletter

Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

Twitter feed

Subscribe now

<b>Subscribe now!</b>

To order your own paper editions,email

Online edition
Previous editions

Don't miss

  • MCM logo
  • The following communiqué and Chair’s statement were issued at the close of the OECD Council Meeting at Ministerial level, this year presided by the Slovak Republic.
  • Food production will suffer some of the most immediate and brutal effects of climate change, with some regions of the world suffering far more than others. Only through unhindered global trade can we ensure that high-quality, nutritious food reaches those who need it most, Angel Gurría, Secretary-General of the OECD, and José Graziano da Silva, Director-General of the United Nations Food and Agriculture Organization, write in their latest Project Syndicate article. Read the article here.
  • Globalisation will continue and get stronger, and how to harness it is the great challenge, says OECD Secretary-General Gurría on Bloomberg TV. Watch the interview here.
  • OECD Secretary-General Angel Gurría with UN Secretary-General António Guterres at the 73rd Session of the UN General Assembly, in New York City.
  • The new OECD Observer Crossword, with Myles Mellor. Try it online!
  • Listen to the "Robots are coming for our jobs" episode of The Guardian's "Chips with Everything podcast", in which The Guardian’s economics editor, Larry Elliott, and Jeremy Wyatt, a professor of robotics and artificial intelligence at the University of Birmingham, and Jordan Erica Webber, freelance journalist, discuss the findings of the new OECD report "Automation, skills use and training". Listen here.
  • Do we really know the difference between right and wrong? Alison Taylor of BSR and Susan Hawley of Corruption Watch tell us why it matters to play by the rules. Watch the recording of our Facebook live interview here.
  • Has public decision-making been hijacked by a privileged few? Watch the recording of our Facebook live interview with Stav Shaffir, MK (Zionist Union) Chair of the Knesset Committee on Transparency here.
  • Can a nudge help us make more ethical decisions? Watch the recording of our Facebook live interview with Saugatto Datta, managing director at ideas42 here.
  • The fight against tax evasion is gaining further momentum as Barbados, Côte d’Ivoire, Jamaica, Malaysia, Panama and Tunisia signed the BEPS Multilateral Convention on 24 January, bringing the total number of signatories to 78. The Convention strengthens existing tax treaties and reduces opportunities for tax avoidance by multinational enterprises.
  • Globalisation’s many benefits have been unequally shared, and public policy has struggled to keep up with a rapidly-shifting world. The OECD is working alongside governments and international organisations to help improve and harness the gains while tackling the root causes of inequality, and ensuring a level playing field globally. Please watch.
  • Checking out the job situation with the OECD scoreboard of labour market performances: do you want to know how your country compares with neighbours and competitors on income levels or employment?
  • Trade is an important point of focus in today’s international economy. This video presents facts and statistics from OECD’s most recent publications on this topic.
  • The OECD Gender Initiative examines existing barriers to gender equality in education, employment, and entrepreneurship. The gender portal monitors the progress made by governments to promote gender equality in both OECD and non-OECD countries and provides good practices based on analytical tools and reliable data.
  • Interested in a career in Paris at the OECD? The OECD is a major international organisation, with a mission to build better policies for better lives. With our hub based in one of the world's global cities and offices across continents, find out more at .
  • Visit the OECD Gender Data Portal. Selected indicators shedding light on gender inequalities in education, employment and entrepreneurship.

Most Popular Articles

OECD Insights Blog

NOTE: All signed articles in the OECD Observer express the opinions of the authors
and do not necessarily represent the official views of OECD member countries.

All rights reserved. OECD 2019