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U.S. consumers exposed to a surge in energy costs due to the war in Ukraine may need targeted support that would delay fiscal consolidation, according to the chief economist of the Organization for Economic Cooperation and Development.
Speaking in an interview on Bloomberg Television, Laurence Boone said some lower-income households are particularly exposed to food and energy that account for between 30% and 50% of their purchases.
“These very high energy and food prices mean that some consumers, some households will be hurt, and those households, they need to be supported,” she said. “If there is this fiscal-targeted support measure for these people, then perhaps fiscal consolidation in the U.S. will be delayed a little.”
The economist’s message follows the OECD’s assessment of the economic impact of Russia’s invasion of Ukraine earlier on Thursday, in which its officials put the onus of the policy response to the crisis on governments rather than central banks.
Boone said support for households would in fact make it easier for the Federal Reserve to continue moving “in the direction that it should” as the recovery from Covid is strong, unemployment is low and prices pressures are broad-based.
“This is a moment for fiscal policy makers,” she said. “That will also actually help inflation to be kept in check by lowering the wage-price spiral.”
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