By Scott Kanowski

Investing.com — Inflationary pressures will force many central banks around the world to keep interest rates higher well into the next year, according to a report from the Organization for Economic Co-operation and Development on Friday.

The OECD said aggregate price growth in most of the world’s major economies is expected to moderate gradually to 5.9% this year and to 4.5% in 2024. Last year the inflation rate for the G20 countries was 8.1%.

The group said this expected decline is mainly due to higher borrowing costs, lower energy prices after a milder than expected winter in Europe and a fall in global food prices.

Core inflation, a measure closely watched by central bank officials that excludes volatile items such as energy and food, “remains stubborn” due to rising prices for services and the resilience of the labor market.

“Monetary policy should remain on track until there are clear signs of a sustained reduction in underlying inflationary pressures,” the OECD said in a statement.

Meanwhile, the organization raised its growth forecast for this year from 2.2% to 2.6% in an update to its November economic forecasts. OECD Secretary-General Mathias Cormann noted that while the forecast is more optimistic than the end of 2022, the state of the global economy is still “fragile”.

Risks are being “tilted downwards,” Cormann warned, highlighting in particular the “turbulence in financial markets.” The OECD report, finalized in recent days amid growing fears about the health of the banking system, signaled that higher interest rates could continue to expose vulnerabilities in the sector.

Earlier this week, the European Central Bank went up 50 basis points to 3%. But policymakers said they would not make any further increases until market turmoil cools following the collapse of Silicon Valley Bank and an attempt by Swiss authorities to grant a liquidity lifeline to the embattled lender Credit Switzerland (SIX:).