Thu, Sep 17, 2015 - Page 14 News List

OECD advises US to increase rates

Reuters, PARIS

The global economic outlook has grown darker than it was only a few months ago, but the US is doing well enough that the US Federal Reserve should go ahead with its first rate increase since the financial crisis, the Organisation for Economic Co-operation and Development (OECD) said yesterday.

The world’s economy is set to grow 3 percent this year and 3.6 percent next year, the Paris-based organization said in an update of its forecasts for major economies.

It trimmed its estimates from 3.1 percent and 3.8 percent in June, citing primarily a slowdown in emerging market economies like China and Brazil.

“Global growth prospects have weakened slightly and become less clear in recent months,” OECD lead economist Catherine Mann told reporters in an interview.

The US stood out as a bright spot. The OECD raised its growth outlook for this year to 2.4 percent from 2 in June. However, it lowered its forecast for next year from 2.8 percent previously to 2.6 percent.

The OECD saw more arguments in favor of the Fed raising interest rates than standing pat when its policymakers meet this week.

“Raising interest rates now would remove uncertainty in the markets,” Mann said.

The pace of future increases was more important than whether the Fed acted, according to the OECD’s simulations, she said, adding: “The path matters four times as much as the timing.”

Looking at the eurozone, its outlook was the brightest in four years. Its growth was projected at 1.6 percent this year and 1.9 percent next year.

The OECD slightly lowered its growth estimate for China to 6.7 percent for this year and 6.5 percent next year after a string of disappointing data and plunges on its stock market.

Brazil was a particularly weak spot in the global economic outlook.

The OECD forecast its economy would contract 2.8 percent this year and 0.7 percent next year as it struggles with a collapse in the price of commodities it exports.

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