The Organisation for Economic Co-operation and Development has said it thinks the US Federal Reserve may need to raise interest rates again this year to head off inflation. In its latest updated world economic forecast the OECD also feels the euro zone’s economic recovery is robust enough for rates to rise there. OECD’s Chief Economist, Jean-Philippe Cotis, said euro zone inflation remains “well under control.” The OECD’s forecast for US growth this year is unchanged at 3.6%. Estimates for Britain – at 2.8% – and the euro zone – 2.7% – are both improved from its prediction in May. Japan’s growth prospects are cut from 2.8% to 2.5%.
The OECD stresses that the European Central Bank should gradually raise interest rates to a neutral level. That follows two consecutive quarters in which euro-zone growth has been above its long-term trend rate. But the OECD pointed out that the recent strong euro zone figures were partly due to transitory factors, such as the World Cup football tournament held in Germany. It expects euro zone growth to slow in the third and fourth quarter.